The FTSE 100 has ended the week deep in the red after bleak UK economic news and a shares plummet on Wall Street.

Around £49 billion was wiped off the value of shares in London as the index closed 204.5 points lower at 3883.4, a 5 per cent fall, having earlier plummeted as much as 9 per cent.

Official figures showed the British economy shrank by 0.5 per cent from July to September - the first quarter of negative growth for 16 years.

It has not been in the red since the second quarter of 1992, before the Black Wednesday plunge in the value of sterling helped boost trade and brought the economy back into the black.

At 5.30pm, the Dow Jones Industrial Average was 347.7 down at 8343.6 on Wall Street, having plunged almost 500 points on opening.

The US drop was widely expected after Dow Jones futures fell as much as 550 points, the maximum amount allowed, before markets opened, triggering a freeze in selling.

US investors also reacted to widespread fears the global downturn would be deeper than first feared, with a wave of profit warnings adding to the negative sentiment.

In Europe, falls followed steep drops on Asian markets - Japan's Nikkei closed 9.6 per cent lower on the back of a disappointing update from electronics giant Sony - and in Russia both stock exchanges had trading suspended after sharp falls accelerated over fears that plunging oil prices would hurt the economy.

The Cac 40 in France finished 4 per cent lower and the Dax in Germany was down 5 per cent.

In London, banking giants HSBC and Standard Chartered led the sell-off after signs of trouble in emerging economies such as South Korea and Argentina.

Both have been relatively unscathed by the turmoil so far, but suffered because of their exposure to emerging markets in Asia. HSBC endured a drop of 14 per cent or 109p to 696p while Standard Chartered slumped 142p to 758p.

Other banking stocks were down on growth fears, with Barclays off 26.25p at 192p and HBOS down 12.9p at 59.9p - putting it at the top of the fallers board.

Lloyds TSB set out the timetable for its takeover of the Halifax owner, but the hefty HBOS fall could reinforce fears that it may walk away from the deal.

Miners were the other major casualties of the session after declines of 64.5p to 329p for Eurasian Natural Resources and a drop of 62.5p to 777.5p for Xstrata.

BP and Royal Dutch Shell were also down - 25p at 440p and 72p at 1427p - as slowdown fears countered any oil price benefit from Opec's decision to cut production.

The latest stock market collapse also reignited worries about the solvency capital levels held by insurers.

Friends Provident declined the most in the sector, down 11.1p at 54p, while Prudential was off 13 per cent or 43.5p to 286.5p after the Financial Times said the insurer was looking at parts of America's AIG beyond its Asian operations.

National Express was another faller, down 5 per cent, or 32.5p to 577.5p, after it said the travel industry was not immune to an economic slowdown, despite further evidence of growth in its most recent trading period.

The FTSE winners were BHP Billiton up 45.5p at 868.5p, Rio Tinto ahead 37p at 2277p, WPP Group up 5.25p at 323.75p and Reckitt Benckiser up 41p at 2598p.

The biggest fallers were HBOS down 12.9p at 59.9p, Friends Provident down 11.1p at 54p, Eurasian Natural Resources down 64.5p at 329p and Standard Chartered off 142p at 758p.

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