CIPS and the CBI blamed the combination of the World Cup and the golden jubilee but economists

CIPS and the CBI blamed the combination of the World Cup and the golden jubilee, but economists had nevertheless expected a bounce from May’s fall.. Panic gripped stock markets across Europe and America yesterday after fears of renewed terrorist attacks and further corporate scandals sent share prices crashing. The index of blue-chip shares tumbled 154 points, or 3.3 per cent, to 4,392. In the past two days more than £60bn has been wiped off the value of the London market.The fall means investors have lost all the gains they had made since Labour won power in May 1997 when the FTSE closed at 4,445. Only last month, the Prime Minister told MPs that the market was “massively up on where it was five years ago”.The Conservatives seized on the fall as evidence that the Government’s economic policy was not working. The crash has wiped out more than £500bn of wealth from institutional and private investors.

The next barrier would be the intra-day low of 4,220 just after 11 September. Des Flood, of Hibernian Investment Managers, said: “If we go through the September lows it could be a bottomless pit.” Chris Chaitow, at the stockbroker Collins Stewart, said the FTSE could be trapped between 3,000 and 5,000 for “many years to come. This looks like a bear market of the sort you only get every 20, 30 or 40 years.”But economists said the markets had given signs that the world had embarked on recovery from its worst recession for 10 years. Richard Graham, head of asset allocation at Barings Asset Management, said: “Our message to clients is not to despair and they will find there are buying opportunities out there.”The slump is expected to help persuade the Bank of England to keep interest rates on hold when its Monetary Policy Committee meets today The falls will hit consumers’ pockets and their confidence. The slump will also deal a fresh blow to pension funds.Stephen Lewis, at Monument Derivatives in the City, said: “The fall in equity prices has now gone so far it is said to be undermining the solvency of some long-term investing institutions. Potentially, this constitutes a very serious threat to the economy.”Traders on Wall Street rushed to dump shares before today’s Independence Day holiday, amid fears that terrorists planned to strike again.The Dow Jones Industrial Average fell below the 9,000 level before a spurt of late buying by bargain-hunters helped it to end up 47.22 at 9054.97. Stock markets fell across Europe, taking the slump on an index of the continent’s 600 largest companies so far this year to ¤1,000bn (£650bn) of their market value.

The chief culprit was Vivendi, the French media giant at the centre of allegations over its accounting practices. It plummeted almost 22 per cent, dragging the Paris bourse down 3 per cent. Frankfurt and Lisbon markets were down 2 per cent and the Dutch bourse down 3.5 per cent.. Lastminute , the internet travel group that survived the dot rout, was yesterday tipped to be on the acquisition trail with a preliminary bid for Online Travel, its smaller rival. Its shares, which have recovered from a record low of 12p in the wake of 11 September, closed down 0.25p at 33.75p, valuing the group at about £35m. Industry sources linked lastminute with Online Travel, which offers travel services for about 50 partner internet sites, including Freeserve and BT Internet, as well as running its own site.

Online Travel said it had “held preliminary discussions with a third party which may or may not lead to an offer being made”.Lastminute declined to comment. Last month it tapped the equity market for the first time since its flotation at the peak of the internet bubble to help fund the acquisition of the group behind the travel4less websites.Online Travel was founded in 1998 and floated in May 2000. It made a loss of £2.6m last year on sales of £46m.Lastminute recently confounded sceptics by breaking into profit ahead of schedule in its core UK and French businesses Last year it reported a pre-tax loss of £53.7m.. The womenswear group Peacock became Britain’s second-biggest discount retailer yesterday after it acquired its privately owned rival Bon March?or £51.3m. Analysts said the move made strategic sense because the two companies targeted different customer groups.