Sterling hit fresh 7-1/2 year lows against the dollar and European shares tumbled again on Wednesday as fears intensified about the banking sector, knocking Barclays shares down more than 20 percent, Reuters reported. Investors rushed to buy government bonds, which sent two-year euro zone government bond yields to a record low. News that global miner BHP Billiton would cut 6,000 jobs and close its giant mine in Australia highlighted concerns that the credit crunch, well into its second year, is savaging the real economy and squeezing global demand for commodities. MSCI world equity index fell 0.9 percent, losing for the third consecutive day. The FTSEurofirst 300 index of leading European shares dropped 1.8 percent. Emerging stocks fell 1.4 percent. Shares in Barclays fell as much as 23 percent to their lowest level since 1985. Other UK banks are also under the hammer despite a second British bank bailout launched by the government on Monday. Sterling fell as low as $1.3737. On top of banking concerns, investors are worried the Bank of England will cut UK interest rates -- already at a record low of 1.5 percent -- even further to boost the economy. Investors expect the BoE to cut again next month, by half a point, which would further dampen sterling's yield premium. But it could go much further. Bank of England Governor Mervyn King said late on Tuesday that quantitative easing measures were now under consideration.
