£35 billion was wiped from shares today as traders reacted to a massive accounting scandal from US giant WorldCom.

The market, already racked with post-Enron nerves, slumped after the telecoms giant reported it disguised £2.5 billion in expenses in what appears to be one of the largest cases of accounting fraud ever.

The firm is the latest in a line of companies to be struck by accounting scandals that have shaken public faith in corporate America.

Stock markets around the world plummeted in the wake of the disclosure, which will hit millions of individuals with money invested in equities through pensions, endowment policies and individual savings accounts.

At its lowest point this morning, the Footsie was down 188.1 points at 4442.9, a fall of four per cent and its lowest since September 21.

By midday, it had pulled back slightly, down 150.6 points at 4480.4.

The fall meant £35.7 billion was wiped from the value of the Footsie, each point equates to around £238 million.

Although dramatic, the falls were less than the slump on September 11, when the Footsie fell 5.72 per cent, which was the last time the index fell by more than four per cent in one day.

The most the Footsie has ever fallen in one session was on October 20 1987, during the storms, when it was down 12.22 per cent.

Tom Hougaard, trader at financial bookies City Index, said a whole panic wave was in motion.

He said: "The losses among pension funds and portfolio managers will be huge and the whole Enron-it is wound has been ripped open once again."

Last night, the Dow Jones industrial average closed down 155 points at 9126.82, while the Nasdaq slumped 36.35 points to 1423.99.

Traders were expecting the Dow to fall another 200 points and the Nasdaq another 45 when they opened this afternoon.