This is not a good time for those of a nervous disposition, says The Economist in this week’s edition. Stockmarkets in London and New York plunged again at the start of another trading week, the losses building on those accumulated in last week’s rout.

In London on Monday July 15th the FTSE-100 index fell 5% to below the psychologically significant level of 4,000 for the first time since December 1996, and later that day in New York the Dow Jones Industrial Average dropped some 440 points at one stage. Share prices later rallied in New York to close only 45.34 points lower at the close, and London prices rallied the following day. But such bouncebacks are normal as a few brave, or foolhardy, investors try to pick up bargains.

No one can be certain how much further prices will fall. But one thing seems clear: the markets are close to panic. The Dow Jones Industrial Average has fallen by nearly 30% since its peak in January 2000, and the FTSE-100 index has lost more than 40% of its value over a similar period. There is no sign yet of a sustained recovery.

Efforts to restore confidence among investors seem to have done more damage than harm. The breathtaking market declines of last week accompanied two speeches by President George Bush declaring his determination to crack down on the accounting fiddles that have shaken American business and alarmed investors.

The president’s remarks seemed to undermine, rather than bolster, sentiment. His proposals were considered too weak and too vague to have much effect, and questions about his own probity became a key issue. The sharp market declines this Monday came as Bush declared that “This economy is coming back. That’s the fact.” Investors may be dreading Bush’s next speech.

Hopes for some steadying of the markets now focus on someone with a bit more credibility with investors: Alan Greenspan, chairman of the Federal Reserve, America’s central bank. Greenspan is testifying before a Senate committee today, and before a committee of the House of Representatives on Wednesday. Greenspan has limited room for manouevre, and he will speak as cautiously as ever. Nevertheless, fund managers around the world will be scrutinising his every word in the hope of finding some reason to believe the worst is over.