Investor confidence has been hit by Bear Stearns' problems
Markets worldwide recorded heavy losses in reaction to the emergency bailout of US investment bank Bear Stearns over the weekend.
Wall Street had a rollercoaster day, with the benchmark Dow Jones average ending in positive territory - up 0.18% - after tumbling in early trading.
European shares suffered most, with the UK's FTSE 100 index ending down 3.9%.
Investors fear that the collapse of one of Wall Street's biggest names means that the credit crunch is escalating.
Rate cut expected
In a further attempt to calm credit markets and ward off a recession, the Federal Reserve is expected to cut its key interest rate by an unprecedented one percentage point when it meets on Tuesday.
This would be on top of Sunday's move to reduce its separate discount rate - the interest rate at which it lends to commercial banks - from 3.5% to 3.25%
The Fed is desperately trying to restore confidence in the banking sector.
As the economy worsens, banks and financial institutions are calling in loans and becoming increasingly reluctant to lend money to borrowers, particularly those considered to be high risk.
Bear Stearns got into trouble when other banks refused to lend it money over fears that it had too many bad debts due to the sub-prime mortgage crisis.
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This is absolutely awful news, and I would like to hear your views on it.
Jake