The spreading fiscal ripples of last week’s terrorist attack on America looked more and more like turning into an economic tsunami as US share prices dived to their lowest level for five years on a massive 14% fall on the week’s trading.

At one point on intra-day lows market analysts estimated that US investors had lost over a trillion dollars, while UK investors had seen £70 billion wiped off London’s top-100 shares.

Investors appeared to be fleeing the share market as fears grew about the war footing being adopted by America and Britain. Recession was a word appearing in reports, as shares across the board hit the greased slide to new depths as UK companies were faced with falling exports as the US slips into a technical recession.

Among the biggest losers on Friday were insurance companies such as Sun Alliance who have significant US dealings, but the UK government brokered a rescue deal for airlines facing a crisis over insurance policies.

The September survey from the Confederation of British Industry showed that the manufacturing sector in the UK, already in recession for six months, had slumped to a three-year low.

Of the few factors propping up the UK economy, consumer confidence and a buoyant retail sector are sure to have suffered a blow, but the unanswered question is how much of a blow?

Nevertheless despite the current economic gloom many US analysts fully expect that the US recession will be short-lived as inventory runs out there will be an economic rebound effect inside a few months. (SP)