Fears that the attack on the World Trade Center could spark a global recession drove shares down to their lowest level in three years on Wall Street yesterday.
The markets had reopened for the first trading session since last Tuesday.
On a black day for investors, the blue chip Dow Jones industrial average logged its biggest one-day point loss, closing 678.52 down, compared to the previous record of 617 on April 14th 2000.
The markets fell despite a 0.5 of a percentage point cut in interest rates by central bankers on both sides of the Atlantic in an unprecedented bid to restore calm among investors and to boost consumer confidence.
But the miracle was that the largest stock exchange in the world was able to get up and running given the vast scale of the destruction to the financial infrastructure caused by the collapse of the twin towers of the World Trade Centre.
The market set a record of 4.5 billion shares traded, according to US Treasury Secretary Mr Paul O'Neill, in an address congratulating traders at the end of the day for resuming business successfully.
The Dow's decline - at 7 per cent - was much less that the record 22.6 per cent fall on October 19th 1987. The technology-laden Nasdaq index also fell by 6.85 per cent.
Worried investors rushed to sell shares in companies worst hit by the attack last week as apprehension grew of US military action and a further lurch towards recession in an economy already weakening before last Tuesday's devastating blow
With Americans expected to stay away from airports and cancel holidays abroad, the airline companies suffered worst of all, plunging 40 per cent. Hotels fell 20 per cent and finance and insurance houses also suffered.
Against this background, Aer Lingus is expected to ground almost half its transatlantic fleet. Cutbacks are to be confirmed in the next few days and it is understood that three of the airlines eight Airbus 330s are to be mothballed.
The large Airbuses are used on the long-haul routes to the US which are to be scaled back. Up to four of the company's 29 strong short-haul fleet will also be taken out of service for the winter.
The US central bank - the Federal Reserve - sought to rally investors with its surprise interest-rate cut before the markets opened and it was followed three hours later by the European Central Bank (ECB).
The Fed also promised large supplies of liquidity to keep the market afloat while the White House said it was carefully watching events on Wall Street as the US economy appeared to be heading into recession in the third and fourth quarters.
The Fed and the ECB, the world's biggest central banks, have been co-operating closely in the aftershock of the attacks, pouring billions into the markets to help stabilise markets.
The Bank of Canada and the Swiss National Bank also cut interest rates in the unprecedented coordinated move.
The ECB has never before moved interest rates between its regular monthly meetings.
It was also the first time the ECB so obviously acted in a concerted manner with another central bank.
Its action means Irish mortgage holders can look forward to a significant reduction in monthly mortgage repayments. Assuming the reduction in rates is passed on in full, the monthly saving will amount to £43 on a £100,000 mortgage and £63 on a £150,000 mortgage.
The ECB said that following the terrorist attacks on the US, uncertainty about the US and the world economy had increased.
Both banks were keen to emphasise their readiness to take urgent action to stabilise the economy and financial markets. The Fed has now cut rates by three percentage points this year. The rate changes led to some volatility on currency markets. The euro was worth $0.9206 in late trading, having soared to a six-month high point of $0.9331 in early trading only to fall to $0.9190 before the ECB cut was announced.
Analysts warned that the rate cuts would not be enough to stave off almost inevitable recession in the US this year.
Mr Oliver Mangan, economist at AIB, said the US was now likely to be in recession until the Spring of 2002. But he added that the cuts should be enough to boost growth heading into the summer.
Mr Aziz McMahon, economist at Ulster Bank, said the move should be enough to skirt recession in Europe.
But according to Dr Dan McLaughlin, chief economist at Bank of Ireland, the US will be in recession at the end of the year and growth next year is likely to be revised dramatically downwards towards 1 per cent.