Financial markets across the globe plummeted on Friday after last night's failure to seal a rescue deal for the big three US carmakers.

At 3pm the FTSE 100 was down by 126.3 points, or 2.9%, while the Dow opened over 200 points weaker before recovering slightly. After Asian markets slumped, European indices followed suit. The UK's blue-chip index was also hit by HBOS' trading update, which revealed an additional £3.2 billion of bad debt accrued since the end of September – this preceded expected shareholder approval for its takeover by Lloyds TSB. HBOS led the UK banking sector slide, down almost 20% at 3.30pm. Lloyds, RBS and Barclays also featured among the heaviest fallers.

Having wiped out last week's losses on Monday, the FTSE has been unable to sustain its recovery, with the weight of the week's negative data too much for global markets to bear. Further job cuts today from Woolworths' distribution firm and Spanish bank Santander – which has announced 1900 UK jobs will go – have simply added to gloom. Overall the FTSE looks set to finish in positive territory this week, but with little end in sight to the barrage of negative sentiment, and the US car industry on the brink of collapse, festive cheer looks to be in short supply.

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