It's Freefall Friday: Shares lose £250m a SECOND as FTSE drops 440points in just 7 mad minutes

Blind panic swept through the City today as the Stock Market collapsed, shedding £80billion in its worst ever opening following huge losses around the globe.

Traders were in a state of 'paralytic fear' when shares crashed through the floor just after the 8am opening.

In seven minutes, the FTSE-100 Index tumbled almost ten per cent or 439 points to reach 3873.00 - its lowest level for more than five years - before clawing back slightly.

Share values dropped at a rate of £250million a second. Bank shares were among the biggest losers as only one company managed to stay in the red.

The Dow Jones in New York also immediately plunged on opening this afternoon, shortly before President Bush was due to give another emergency statement.By lunchtime the index of leading British companies stood at 3996.54, down 317.26 points or 7.3 per cent - its lowest level for more than five years.

Another disastrous night on Wall Street which saw the Dow Jones close down 7.3 per cent and below 9,000 for the first time since 2003 sparked blind fear on the markets.

Asian stocks went into a vicious decline overnight, followed by indexes in Indonesia, Australia and New Zealand before the panic spread to Europe this morning. An emergency worldwide rates cut and bank bail-outs on both sides of the Atlantic has completely failed to restore confidence amid growing fears of a global recession.

The Prime Minister urged world leaders to find 'a global solution' to the crisis but the inter-bank lending rates of sterling rose for both short term and long term lending today - proving action taken so far has done nothing to unclog frozen credit markets.

The overnight rate for sterling rose 0.4% to 5.81 and the three-month lending rate - a key measure in pricing mortgages - was up 6.281 to 6.285.

Henk Potts, director of investment strategy at Barclays Stockbrokers, said: 'I think it's very close to panic. We are drowning in a sea of red numbers.' In Britain, bank shares fell across the board. HBOS were down 17 per cent, RBS 16 per cent, HSBC 13 per cent and Barclays 15 per cent at lunchtime.

Adding to the general panic was the fact that today is when credit default swaps related to the debts of collapsed investment bank Lehman Brothers are to be decided.

Experts have estimated claims by creditors of the firm could run to $400billion which will hit banks, hedge funds, insurers and other financial institutions with fresh woes.

As fears of a lengthy recession deepened, the price of oil also dropped to below $80 for the first time in a year.

And in Britain, there was further gloom because the pound has now slumped to a five-year low against the dollar.

Across the world, shares were in the red. In Europe, benchmark indexes in France and Germany also plunged almost 10 per cent in early trading. Spain's Ibex stock index was down more than six per cent.

Austria's financial watchdog stopped trading in all securities if they swing more than 10 per cent and introduced a ban on short-selling to try and ease the turmoil.Earlier in Asia, Japan's Nikkei closed down 9.62 per cent in its worst session since Black Monday in 1987. The Hang Seng in Hong Kong closed down more than seven per cent and China's benchmark index was down 3.57 per cent.

'Selling is unstoppable in New York and Tokyo,' said Yutaka Miura, senior strategist at Shinko Securities Co. Ltd. 'Investors were gripped by fear.'

Yamato Life Insurance Co in Japan became the country's first financial collapse of the crisis, folding with £1.8trillion in debts.

In the Philippines, shares closed down 8.3 per cent. Trading was suspended 'indefinitely' in Indonesia to prevent any more losses and also halted in Vienna.

Meanwhile, in Australia, experts dubbed it 'Black Friday' after its stocks tumbled 8.34 per cent in its biggest ever one-day loss. In New Zealand, shares fell 4.72 per cent.

'There's no bottom to the stock markets now,' added Francis Lun, general manager at Fulbright Securities Ltd. in Hong Kong. 'There's no clue when it will stop.'Traders were reduced to praying for calm. In Singapore, where shares plunged seven per cent, they flocked to stroke the belly of a 7ft Buddha statue in the hope some good fortune would rub off.

'I came down here on my lunch break to get some luck for me and for the whole world, the economy, everything, but there are some things even Buddha can't help,' said Albert Goh, a 60-year-old accountant.

The sell-off on Wall Street last night took place exactly one year to the day after the Dow enjoyed a record high of 14,164.

Since then, frozen credit markets, rocketing levels of mortgage defaults, job losses and outright fear have knocked 39 per cent from its value. On paper, the losses are worth $8.3trillion.

A temporary ban on short-selling in the U.S. - the practice of making money from falling share prices - has also now expired, adding to the turmoil.

David Wyss, chief economist at Standard & Poor's in New York said: 'Right now the market is just panicked. Nobody wants to take on any risk. Everybody just wants to get their money and put it under the mattress.'The world's economic powers are under huge pressure to act boldly together in a bid to try and stop the crisis from escalating further.

Financial leaders from the G7 group of rich countries, including Chancellor Alistair Darling, are meeting in Washington today to discuss their next move.

Mr Darling is expecting to urge them to follow Britain's lead and recapitalise banks in the hope it will restore confidence and kick-start wholesale markets.

Later today, President Bush is due to make another statement about the crisis in a bid to reassure the U.S. people officials are doing everything to restore stability.

'Politicians must be scared by now, looking at stock markets and the problems in the credit markets,' said Dariusz Kowalczyk, chief investment strategist at CFC Seymour Ltd in Hong Kong.

'Much more needs to be done,' he said. 'The G7 has to announce that they will provide massive capital injections and guarantees for the inter-bank market.'At the centre of a financial crisis, now almost a month old, credit markets remain in deep distress because banks are so desperate to hang onto the money they have.

Until they start to lend to each other, there is little hope of relief for people in need of money for mortgages or to keep their businesses going during the slowdown.

In the latest attempt to ease the panic, the U.S. and Dutch governments are preparing to follow Britain's lead and shore up the capital of banks.

The U.S. Treasury plans to start injecting capital in banks as early as this month, according to a source close to Treasury Secretary Henry Paulson.

This would mean an even larger role for the U.S. government, making it the lender and investor of last resort.

Until this week, American policy had been to focus on buying up banks' 'toxic' mortgage debts but experts hope recapitalisation might be a more direct strategy.Japan's export-dependent economy has now been dragged into the crisis thanks to rising bankruptcies in the property sector and among small businesses.

'This is panic,' said Takashi Ushio, head of investment strategy at Marusan Securities in Tokyo. 'Paulson will have to definitely promise the injection of public funds, and then he'll have to make the timing of this very clear.'

The International Monetary Fund yesterday announced that a $200billion (£116billion) fund would be made available to struggling governments.

Relaunching measures last used during the Asian financial crisis of the 90s, it pledged to answer calls by any countries facing problems.

Dominique Strauss-Kahn, the managing director of the IMF, declared that the world was now on the 'cusp of recession'.

He called on countries to act 'quickly, forcefully and co-operatively' to stop the economic nosedive. 'There is no domestic solution to a crisis like this one,' he said.