Leading Russian shares lost a fifth of their value, Treasury bills posted their biggest one-day loss in two years and government bonds slumped yesterday as global financial turmoil took its toll. Sensing panic on the markets, top financiers and politicians took it in turns to try to soothe jumpy investors and market regulators stepped into the fray, albeit without much success.

Central bank chairman, Mr Sergei Dubinin said Russian markets could turn out to be among the world's most stable.

The Russian Trading System index of 21-leading shares closed down 19 per cent to 392.86 from Monday's close of 485.16.

Russian stocks had been the world's fastest risers in 1997, partly explaining the extent of the drop. Wary traders did not rule out further losses. But the early recovery on the New York Stock Exchange, if sustained, could help Moscow stabilise on Wednesday, as could bargain hunting.

Meanwhile the government securities market saw the sharpest drop in nearly two years, taking yields to a five-month high. For all the gloom, Western analysts saw the long-term outlook for Russia's nascent market economy as bright.