Equity markets fluctuated violently on Friday – with London and continental Europe experiencing their worst one-day falls in four years and Japan tumbling sharply – as the US Federal Reserve and other central banks scrambled to avert a liquidity crunch.

The Fed promised to provide whatever funding was needed to ensure that banks are able to continue lending to each other at its desired interest rate of 5.25 per cent and pumped $38bn into the system in three separate open market operations.