LONDON, July 7: Global financial markets were badly shaken on Thursday by deadly bomb attacks on London underground trains and a bus. However, in Frankfurt the president of the European Central Bank reassured people that financial markets in Europe were functioning.

Jean-Claude Trichet declared that there was no need for special action by the ECB or the Bank of England, which both left interest rates steady on Thursday, but that they stood ready to intervene if necessary.

World stock markets plunged while sterling slid as London’s transport network was hit by fatal blasts that also sent oil prices plummeting from the day’s record peaks.

Volatile oil prices meanwhile pressured the US dollar.

“The rapidly deteriorating news flow on the situation in London is creating the expected and justifiable response in markets,” Calyon analyst Daragh Maher said.

London’s FTSE 100 index of leading shares tumbled 1.74 per cent to 5,138.80 points after falling more than 3.0 per cent following initial news of the explosions.

The Dow Jones Industrial Average dropped 0.64 per cent to 10,204.62 points in morning deals and the tech-heavy Nasdaq composite lost 0.62 per cent to 2,055.92.

Back in Europe, the Frankfurt DAX 30 dived 1.85 per cent to 4,530.15 points in late trading and in Paris the CAC 40 dropped 1.42 per cent to 4,219.06.

The DJ Euro Stoxx 50 index of leading eurozone shares tumbled 2.01 per cent to 3,159.24 points.

Sterling fell sharply on news of the blasts, remaining under pressure after a decision from the Bank of England to keep British interest rates on hold at 4.75 per cent for the 11th month in a row.

The pound stood at $1.7424 at about 1515 GMT after falling to as low as $1.7404 in late European trading, from $1.7532 late on Wednesday in New York.

The euro climbed to $1.1941 in late afternoon European trading from $1.1930 late on Wednesday.

The European Central Bank held its ground on Thursday keeping its key rate steady at 2.0 per cent for the 25th month running despite fierce political pressure for a cut to bolster the faltering eurozone economy.

The US unit suffered as oil prices hit new record high points in morning trade.

But following news of the London attacks, world oil prices tumbled by more than $4. Oil futures had earlier surged past $62 per barrel in New York on supply concerns.

“Crude oil prices are trading in exceptionally volatile fashion as the market absorbs reports of explosions in many parts of London,” Barclays Capital analyst Kevin Norrish said.

New York’s main contract, light sweet crude for delivery in August, dived $4.08 to as low as $57.20 per barrel in electronic deals on Thursday.—AFP