Turmoil in the global financial markets continued on Friday when the FTSE 100 dropped more than 3.4% at the open as nervous investors dumped stocks amid fears about the strength of the US economy and the ability of European governments to contain the debt crisis.

The blue chip index was trading more than 170 points lower at 5,200 in early trading – an even larger downward lurch than had been expected following the dramatic 500 point fall on Wall Street and big falls in Asian stock markets overnight.

The Dow Jones Industrial Average plunged 4.3%, one of its biggest ever falls, sparking a 3.7% slide in Japan’s Nikkei and a 5% drop in Hong Kong’s Hang Seng.

The FTSE 100 is on track for a third consecutive triple-digit close. The last time there was a sequence of large falls was in September 2008 in the aftermath of the collapse of Lehman Brothers.

Bank shares were particularly hard hit. Bailed-out Royal Bank of Scotland – which reported a first-half loss of £794m – and Lloyds Banking Group were down 10% in early trading, as was Barclays, which was the largest faller by 9am. … Read full article