The City is bracing itself for further pain when markets open following the rejection of a 700 billion US dollar (£385 billion) bank bail-out.
Experts suggested that the FTSE could drop a further 200 points when London opens, wiping a further £48 billion off the value of blue chip stocks - adding to the £64 billion loss it has already sustained.
In the US, the fall-out from the House of Representatives' refusal to back the rescue plan was immediately followed by a drop of nearly 5% in the Dow Jones Industrial Average.
The move piled on the gloom over the UK economy, with fears of further contagion from the US crisis.
It comes following a day in which the FTSE plunged 269.7 points to 4818.8 - a 5.3% fall and its lowest close since April 2005.
Responding to the vote in the US, Justin Urquhart Stewart, of Seven Investment Management, said: "This is not good news at all. Although 700 billion dollars wouldn't have solved the problem, it would have helped. Things could get nasty."
David Buik, of Cantor Index, said: "They will have to go back and renegotiate. To have no agreement is a non-option, it is just ridiculous.
"Those who have have voted 'no' have engaged their backsides rather than their brains."
