The US government shored up two of the country’s biggest lenders yesterday and sent the UK stock market plummeting, it has been reported.
Its central bank bailed-out mortgage giants Fannie Mae and Freddie Mac with $7.5 billion (£3.5 billion) and £30 billion was then slashed of UK valuations.
Ben Bernanke, chairman of the US Federal Reserve, told congress to expect further bad news from the economy.
The Times reported he said: "The possibility of higher energy prices, tighter credit conditions and a still-deeper contraction in housing markets, all represent significant downside risks to the outlook for growth."
The news from the US dragged the FTSE 100 index of top companies to 5,171.9, a three-year low not seen since terrorist attacks on London in October 2005.
Similarities remain between the two economies the Office of National Statistics revealed UK inflation accelerated to 3.8 per cent in June and both have witnessed falling commercial property prices.