The US economy is likely to “stagnate” in the second half of this year, the International Monetary Fund warned on Friday, as stock markets in the US and Europe fell to their lowest levels since March and US bank shares hit a five-year low.

The Dow Jones Industrial Average closed below 12,000 for the first time since March, while the broader S&P 500 fell 1.9 per cent, as oil rallied and concerns about the financial sector intensified.