Global stock markets plummeted yesterday as governments threw ever more at the financial crisis but failed to stop it becoming significantly worse.

Global stock markets plummeted yesterday as governments threw ever more at the financial crisis but failed to stop it becoming significantly worse. The UK's FTSE-100 index sustained a record points loss and New York's Dow Jones Industrial Average suffered its biggest-ever intra-day drop of 800 points.

The latest rout heaped pressure on Prime Minister Gordon Brown to take even more radical action to stabilise the UK banking sector, with talk swirling last night that the government could go as far as injecting capital into most of the big banks in return for equity stakes.

Royal Bank of Scotland, HBOS, Lloyds TSB, and Barclays were being touted vaguely last night as potential candidates for a capital injection from government.

Speculation meanwhile continued to mount that the UK government would be forced to follow Ireland, Denmark and, seemingly, Germany in guaranteeing all personal deposits at banks.

The FTSE-100 sustained the biggest one-day points loss since it was created in 1984, plunging by 391.1 points, or 7.8%, to 4589.2. It was down as much as 430.6 points at one stage during the session, at 4549.7, and its close last night was its lowest finish for more than four years.

Yesterday's 7.8% drop was the FTSE-100's third-biggest-ever in percentage terms. It has been exceeded only by the falls on Black Monday on October 19, 1987 and the following day when the FTSE-100 dropped by 10.84% and 12.22% respectively. The FTSE-100's fall yesterday wiped about £93bn off the combined value of the UK's top 100 companies.

Alastair Cumming, investment manager at Barclays Wealth in Glasgow, told The Herald: "I think we are in the capitulation stage, which means we can go anywhere until the (share) prices bring sense to the authorities to act to sort it."

Global stock markets plummeted yesterday as fears of global recession increased.

Traders took fright at the scale of the developing problem amid a political signal by the German government that it would guarantee all personal deposits, and stock markets were unsettled by the need for the Berlin government to put together a second rescue deal for banking group Hypo Real Estate as conditions deteriorated. Concerns grew that the $700bn financial system bail-out plan voted through in the US last week might not be enough.

This plan involves the US government buying up toxic debt including mortgage-backed instruments.

When the plan was first mooted on September 19, the FTSE-100 recorded its biggest-ever one-day points gain of 431.3.

The Federal Reserve meanwhile pledged yesterday to put up $900bn of cash loans to struggling American banks between now and the end of the year.

Trading was suspended temporarily yesterday in the stock markets of Brazil, Peru, and Russia, amid the latest global turbulence.

In Iceland, trading in financial stocks was halted. Iceland later agreed emergency legislation giving the financial regulator power to dictate a bank's operations, to the extent of forcing it to merge with another institution or even declare bankruptcy, as the country's 300,000 inhabitants saw a 30% plunge in their currency.

The FTSE-100 had closed at 6732.4 points on June 15 last year - which was its best finish since September 2000. It closed within a hair's breadth of this level, at 6730.7 points, on October 12 last year.

Cumming said: "If you look at the charts, we could go down to 4200 (points) quite easily in this sort of environment we are in. We will probably trade in between 4200 and 5200, I think, this side of Christmas."

In New York, the Dow plummeted through the 10,000 mark. It was at one stage down 800.06 points on the session - its worst-ever intra-day points loss - at 9525.32. It later steadied itself slightly to finish 369.88 points lower at 9955.5.

Diane Wilde, head of charities investment in Scotland for Barclays Wealth, noted that the last time financial markets had "forced the authorities to make a move" was when sterling exited the European Exchange Rate Mechanism in the autumn of 1992.

Weighing up what action the UK Government might have to take this time, she said: "So what do they have to do? Guarantee deposits and slash interest rates. What else can be done just now?"

She added: "Depositors will have to pay the price for having the deposits guaranteed, because then we can slash interest rates, depositors get less (interest), and the banks can try and build up their loan books again. That is the economic theory."

Expectations are mounting that the Bank of England's Monetary Policy Committee will cut UK base rates from 5% when it concludes its next monthly meeting at noon on Thursday, with some believing it could deliver more than the conventional quarter-point move.

The Confederation of British Industry called yesterday for a half-point cut in UK base rates on Thursday "in the interests of stabilising confidence for markets, businesses and consumers".

Asked yesterday where he thought stock markets would go from here, Cumming replied: "It is interesting. The market is calling the government's bluff in a way."

Referring to the meeting of European leaders in Paris on Saturday, Cumming added: "They had the meeting in Europe. One thought, from all the headlines, they were all together on this. Before Brown gets off the plane, Germany has capitulated and protected its depositors.

"If Brown wants to be seen to be acting quickly, he needs to bring something out the bag very quickly or the market will exert the pressure on him to do so. He doesn't want to be seen to be bounced into a situation ... but he is going to have to (act)."

Citing US billionaire Warren Buffett's investment in US investment bank Goldman Sachs, Cumming said: "What I think the (UK) government will try to do is do what the Sage of Omaha did. Buy into banks."

Cumming speculated that the government could buy into banks at a preferred yield, with a warrant attached.

He said: "There has been a lot of rhetoric (from government that) we will do whatever it takes'. There needs to be some action to get the right solution. I think the authorities have got to act ... by tomorrow morning at the latest."

Highlighting the gravity of the situation, Cumming declared he had "not lived through this before" in more than 30 years in stockbroking.

Calling on the MPC to cut base rates by a half-point, CBI deputy director-general John Cridland, said: "In the light of the current turmoil in the markets, the damage to confidence and implications for the real economy, the CBI believes that the Bank of England should cut interest rates by half a point when it meets on Thursday.

"In our recent economic forecast, we believed that the MPC would have scope to cut rates by half a point in November, but in the interests of stabilising confidence for markets, businesses and consumers, the CBI now believes that this move should be brought forward to the October meeting."

The UK's FTSE-Mid 250 index tumbled 520.8 points or 6.5% to 7474.8.