Leaders to hold crisis talks as fears mount of a double-dip recession

World leaders prepared for crunch talks over the global economy today as the FTSE-100 failed to rally following its biggest one-day fall in two and a half years.

The blue-chip index dipped below the 5000 barrier to stand 1.41 per cent down at 4970 by late morning. As fear stalked the City for a second day, hopes that a bounce would make up some of the ground lost in yesterday's massive stock market sell-off faded.

Other stock markets across Europe were slightly up in early trading after tumbling by about five per cent yesterday - the biggest fall since the height of the crisis in spring 2009.

David Cameron promised to lead a "coalition of the willing" if world leaders failed to reach a breakthrough in crucial trade talks.

The Prime Minister is dismayed at a lack of progress on a deal which could deliver a $170 billion boost to global economies as fears of a double-dip recession grow by the day. Mr Cameron wants November's G20 meeting to focus on breaking the deadlock on the so-called Doha round of trade talks, which have been rumbling on since 2001.

In a speech to the Canadian parliament in Ottawa, he repeated calls for leaders to show "political will" and reject protectionism at a time of economic gloom, saying trade was "the biggest wealth-creator we have ever known". "The whole point about trade is that you're baking a bigger cake - everyone can benefit from it," the Prime Minister said.

He added: "If we can't get a deal involving everyone then we need to look at other ways in which to drive forward with the trade liberalisation the world needs, ensuring the continued work of the WTO preventing any collapse back to protectionism but going forwards, perhaps with a coalition of the willing."

His choice of words will raise eyebrows - the phrase "coalition of the willing" is most associated with George W Bush's alliance of countries who backed action in Iraq. But it is another sign that the Prime Minister is growing increasingly frustrated with the failure of other leaders to take decisive action on the economy.

Yesterday he signed a joint open letter alongside Australia, Canada, Indonesia, Mexico and South Korea demanding action to boost growth. World Bank president Robert Zoellick and IMF chief Christine Lagarde both warned the world was back in the danger zone as markets tumbled across the globe.

City traders said there had been opportunistic buying of shares seen as cheap today after yesterday's 4.7 per cent slide in the FTSE-100 but they did not expect it to last for long.

Overnight, Asian shares fell sharply, with South Korea's main Kospi index slumping 5.7 per cent and Australia's ASX losing 1.6 per cent.