The FTSE has slipped below the 5000 mark once again as investors talk of a growing crisis of confidence in the world economy and fears for another significant recession.

By 10:00 on Friday in London the FTSE was down more than 2.5 per cent at 4960. At one point earlier in the morning it was languishing at 4880. Once again banking stocks were among the biggest losers.

Overnight Japan’s Nikkei 225 Stock Average lost 2.5 percent, confidence not helped by another major earth tremor in the country triggering a tsunami warning. On Thursday evening the Dow Jones in New York finished down 3.7 per cent but the biggest losers yesterday were within the eurozone, with Germany's Dax index down five per cent. This morning the Dax was down another 3.5 per cent - or nearly 200 points.

Thursday's panic selling was triggered by worse than expected manufacturing data from the US, coupled with Morgan Stanley cutting its eurozone growth forecasts .

Investors appear to be losing confidence in part because eurozone leaders are seemingly unable or unwilling to reach agreement on how to curb the mounting debt crisis among member states. Earlier this week the German Chancellor and French President ruled out issuing eurobonds - which would involve eurozone countries clubbing together to borrow money as a bloc.

Many analysts believe eurobonds are a necessary measure to bring Europe's debt crisis under control, but it's unclear whether the German Chancellor Angela Merkel has the political capital in her own country to agree to them.

The European Central Bank's chief economist announced on Friday that he was also opposed to the introduction of eurobonds. However many smaller European nations, including confidence-hit Italy, are very much in favour of them.

Despite warnings from analysts several weeks ago that any further policy paralysis within the eurozone could be catastrophic, there is no outward sign that the eurozone leaders are any closer to a concrete agreement to resolve the crisis.