Traders were unconvinced by a radical proposal by the International Monetary Fund (IMF) to deploy $1 trillion (£648bn) to stem the European debt crisis and its impact on the global economy.
Christine Lagarde, head of the IMF, dramatically announced the fund's intention to raise $500bn to almost double its resources after a meeting of the 24-strong executive committee.
Ms Largade said its members recognised the "importance of ensuring adequate fund firepower to help defuse current global economic weaknesses and regional challenges."
But neither traders nor economists - nor some key politicians - were prepared to bet on the delivery of the IMF's plan and worried instead about the advancing debt crisis.
The yield on 10 year-gilts, which have become a bellweather of stresses in the eurozone, fell to a record low of 1.917pc before recovering to 1.963pc as bondholders sought shelter in UK debt. Stockmarkets across Europe slid amid more predictions of recession, bail-outs and downgrades.
Citigroup cut its 2012-2013 growth forecasts for a range of European economies amid warnings that the "underlying causes of the [eurozone] debt crisis have not been resolved."
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