Markets drop sharply on investors'' recession fears

Stock markets around the world have dropped sharply, as investor fears of a deep global recession increase.

In London, the FTSE 100 fell 5.2 per cent – wiping out a third of last week''s gains – and was down again this morning by over 1.3 per cent.

Meanwhile, the US exchanges fared still worse, with the Dow Jones falling 7.7 per cent and the broader S&P 500 by 8.9 per cent.

Recession-signalling manufacturing figures from Europe and America were partly to blame for the sharp falls.

Factory gate data showed a record low in the UK and a 26-year low in the US, the Daily Telegraph reports.

Downbeat comments on the economy by Federal Reserve chairman Ben Bernanke, Treasury secretary Henry Paulson and respected Oppenheimer analyst Meredith Whitney also hit investor sentiment.

In particular, Ms Whitney released a very bearish note on the prospects of the credit card sector, predicting a further 45 per cent drop in consumer liquidity.

"Pulling credit when job losses are increasing by over 50 percent year-over-year in most key [US] states is a dangerous and unprecedented combination, in our view," the analyst said.