The fear of a banking collapse in Europe is still affecting markets across the Atlantic.
The Dow Jones was down 0.61pc, the S&P 500 was 1.23pc and the Nasdaq slipped 2.01pc.
Meanwhile, Occupy Wall Street rumbles on...
20.59 Eurozone chiefs are meeting in Frankfurt tonight for crisis talks. Nicolas Sarkozy and Angela Merkel gathered for a "working meeting" with IMF head Christine Lagarde and Jean-Claude Trichet.
20.45 Amid all this doom and gloom, Paul Morris tweets:
High inflation, high unemployment, rioting and the Tories are in power. If we're having the 80s back can we have Spitting Image as well?
20.11 A quick update on Wall Street now, with around an hour to go until the bell rings.
Stocks fell on disappointing earnings from Apple, and the Federal Reserve saying that while the economy kept growing slightly in September, prospects for the future were dimming.
The Dow Jones was down 0.67pc, the S&P 500 fell 1.24pc and the Nasdaq was off 1.87pc.
19.49 Jin Liqun, chairman of China's sovereign wealth fund China Investment Corporation, spoke to Channel 4's economics editor Faisal Islam today about the eurozone debt crisis. Both are in Paris for the EU summit this weekend, and the interview is being shown on Channel 4 now:
The root cause of trouble is the overburdened welfare system, built up since the second World War in Europe - the sloth inducing, indolence inducing labour laws.
People need to work a bit harder, they need to work a bit longer, and they should be more innovative.
The European countries enjoy a lot of advantages in science, technology, in managerial expertise. You just need to tap those advantages and you will be back on your feet.
19.35 Greek lawmakers have given new austerity measures their initial approval in the last few minutes. The bill received 154 votes, with 141 against. A second vote will be held tomorrow.
19.25 The Beige Book data from the US Federal Reserve is now out, covering August 27 through to October 7.
It says that the 12 bank regions in North America expanded at a modest pace, a slight improvement from the previous period. Consumer spending rose slightly in most districts, driven partly by new car sales.
Reports from the 12 Federal Reserve districts indicate that overall economic activity continued to expand in September, although many districts described the pace of growth as 'modest' or 'slight'.
Many districts noted restraint in hiring and capital spending plans. Respondents indicated that labor market conditions were little changed, on balance, in September.
All 12 districts reported that real estate and construction activity was little changed on balance from the prior report. Residential construction remained at low levels, particularly for single-family homes.
18.55 Some more details on the protests in Greece are emerging: 38 police officers and three protesters have been hospitalised, while 33 have been detained for questioning.
We're also hearing that the Greek parliament has begun its vote on new austerity measures. Finance Minister Evangelos Venizelos said the public would have to accept them:
We have to explain to all these indignant people who see their lives changing that what the country is experiencing is not the worst stage of the crisis. It is an anguished and necessary effort to avoid the ultimate, deepest and harshest level of the crisis. The difference between a difficult situation and a catastrophe is immense.
18.45 The Daily Telegraph associate editor, Jeremy Warner, is writing on this weekend's EU summit at the moment. He tweets:
Confusion reigns over whether this weekend's EU summit can agree the grand plan. I'm writing at length on this for my Daily Telegraph column
And we'll bring you that article later this evening. Meanwhile, Angela Merkel has said the summit won't be the "end point" of the crisis.
It won’t be the final point where we regain the confidence of others, but it will be a stepping stone, a marker on the road. All of the sins of omission and commission of the past cannot be undone by waving a magic wand. We have to pursue our economic activities sustainably. This is going to be a long and arduous road.
18.25 We have a slideshow of images from the Greek protests today. Although they look a lot more like riots than protests at the moment: Stones and fire bombs hurled at police in front of the Greek parliament in Athens.
Police claim there are 125,000 protesters on the streets, while the unions argue it's more like 200,000.
Later this evening the Greek parliament will hold its first vote on new austerity measures, which include collective wage amendments, tax break cuts and a new salary scheme for the civil service. It will also see thousands of lay-offs in the public sector. The final vote will be held tomorrow.
The government warns that not passing the new package would jeapordise further bail-out cash payments from Europe, but the public aren't happy.
18.12 We now have the full text of Trichet's leaving speech online: ECB president Jean-Claude Trichet 's leaving speech: in full
18.01 Jean-Claude Trichet, who is today stepping down as ECB president, has given his farewell speech.
He said "the present calls for immediate action. The future calls for a vision of where we are going, a sense of direction. Immediate action."
He went on to quote Goethe: "To know is not enough. To intend is not enough. We must do it!"
"I think this applies admirably to the sense of action which should inspire Europe in coming days," he added.
17.37 Clashes between Greek police and protesters are getting more and more violent. In this video a protester catches fire during during the biggest anti-austerity protest the ravaged-debt country has seen in the past two years.
17.05 Writing just before the close, Angus Campbell at Capital Spreads, said:
With so much chatter about the validity of claims and counter claim, there’s a great deal of market noise which meant that today’s gains were not exactly easy to come by. Germany remains content to down play this weekend’s meeting when so much rides on its outcome and investors could still be left disappointed come Monday. They have to realise that time is not on their hands and that the financial markets are expecting something big, but until then they will remain on tender hooks.
17.01 Europe's markets have closed.
The FTSE 100 in London closed up 0.74pc at 5,450.89, while the CAC 40 in Paris finished up 0.5pc at 3,156.19, and the DAX 30 in Frankfurt ticked up 0.85pc to 5,929.27.
16.50 While we're in Frankfurt, Angela Merkel has just finished speaking on the crisis.
Reiterating Monday's message, she told the audience that there is no "magic wand" to solve the eurozone crisis, and that Sunday's summit would not be the "end point".
But she also vowed that Europe would not allow the euro to fail.
Incoming ECB president Mario Draghi is next up to wax lyrical about Trichet's achievements.
16.15 Mr Sarkozy has left the building...or should I say country. His office has confirmed he will be joining Merkel and co in Frankfurt for talks later today.
Waiting for Sarko: Angela Merkel and Jean-Claude Trichet attend a farewell celebration for the outgoing ECB president on Wednesday (Photo: Getty)
16.00 Where exactly is French President Nicolas Sarkozy right now?
According to Reuters and now Bloomberg, he’s making his way to Frankfurt where German Chancellor Angela Merkel has joined famous finance heavyweights including IMF chief Christine Lagarde to bid farewell to outgoing ECB president Jean-Claude Trichet.
Earlier, Mr Sarkozy said that Paris and Berlin were divided over what the relationship should be between the ECB and the EFSF. He said:
In Germany, the coalition is divided on this issue. It is not just (Chancellor) Angela Merkel who we need to convince.
He was earlier spotted leaving La Muette maternity clinic in Paris, where wife Carla Bruni was reported to be giving birth.
French President Nicolas Sarkozy leaves La Muette maternity clinic in Paris on Wednesday (Photo: AFP)
15.30 Europe is holding on to its early gains. The FTSE 100 is up 0.7pc at 5,450.89, while the CAC 40 in Paris is up 0.5pc at 3,156.19, and the DAX 30 in Frankfurt is up 0.85pc at 5,929.27.
15.20 Meanwhile, Apple shares are still suffering from last night's disapointing results. The company sold 17m iPhones over the past three months - but that number wasn't enough to impress analysts, who were expecting sales of 20m.
Shares are currently down 5pc at $400.53.
14.50 Banks are enjoying a bit of a purple patch this week. Morgan Stanley is currently up 3.2pc at $17.17 on the back of its better-than-expected results, while JP Morgan is up 2.7pc and Goldman Sachs is up 1.05pc.
14.30 The Dow Jones has dipped 8.7points - or 0.09pc - to 11,568.31 at the open in New York.
14.15 Protests in Athens have boiled over into violence some areas. protestors outside parliament showered the police with stones and fire bombs, and had tear gas fired in their direction in return.
13.45 US housing starts, the number of new houses being built, rose more than forecast in September - work started on some 658,000 new homes, up 15pc from August and the most since April 2010.
13.40 The US inflation figures are out now and they are quite a contrast to the UK's yesterday - inflation rose at its slowest pace in three months in September, with the consumer price index climbing 0.3pc.
That takes the annual rate of inflation in the US to 3.9pc, compared to 5.2pc in the UK.
13.10 Bruno also says talks between France and Germany on expanding the bail-out fund have very much not concluded, despite earlier reports. There are to be informal meetings of eurozone leaders tonight at Jean-Claude Trichet's leaving do from the European Central Bank. He says:
A senior EU source has told me that there is no agreement between France and Germany as “very difficult” negotiations drag on over the size of a leveraged EFSF bailout fund and the size of the haircut to be given on Greek debt held by private investors.
"There is agreement on the principle but not on the figures,” said the official. “Talks are very difficult, especially on private sector involvement but also on the leveraged EFSF figure.”
There are hopes that more informal meetings in Frankfurt tonight might break the deadlock at a leaving ceremony for Jean-Claude Trichet, the departing head of the ECB.
Angela Merkel, the German Chancellor will be there as will all the eurozone’s leaders and most senior officials. Only Nicolas Sarkozy, the French president will be absent, after his wife Carla Bruni was admitted to hospital to give birth to their first child, her second.
President Sarkozy reportedly accompanied his wife as she checked in at the Clinique de la Muette in Paris this morning.
13.00 The Telegraph's Brussels correspondent Bruno Waterfield reports what Jose Manuel Barroso, European Commission president, has to say about the liklihood of crisis resolution this weekend.
Mr Barroso said: that this weekend's summit was a turning point for the future of the EU but played down expectations of a visionary package to save the euro.
We are at a crucial moment, a crucial point , a point that will be crucial to the future of the euro but also the future of Europe. I didn’t want to overdramatize things but I did want to get people to face their responsibilities.
We are at a very, very sensitive point in European construction. Decisions taken or not take will doubtless have an impact.
We are at a turning point, a decisive point that requires clear and determined responses, comprehensive responses. I cannot anticipate what exactly will be the outcome of the European Council.
Even if we do arrive at a political decision on everything that is on the table which I hope we will, that doesn’t necessarily mean that there will not then have to be an implementing phase.
"You cannot hope that this will be the end of all our troubles but I very much hope that important, long term positions which are important for the future ot the EU and the euro will come about."
12.55 Bizarre eurozone story of the day - the German finance ministry has apparently been handing out fortune cookies around Berlin, which are filled with "positive" mottoes such as "Progress due to a stable Europe."
Some 16,000 of the cookies were produced at a cost of €4,000, and were distributed between August and Germany's national day on October 3.
They could become collectors' items if the euro does collapse, assuming they haven't all been eaten...
12.45 There is a fair bit of economic data coming out of the US this afternoon, which may affect market sentiment - inflation figures and the number of new houses being built are both out at 13.30, and the Federal Reserve's Beige Book, which gives a snapshot of the health of the economy, is out at 7pm.
12.00 Conflicting reports are out there this morning on what France and Germany intend to do to expand the bail-out fund.
As reported below (7.35 post), the Guardian is running a story which says the intention is to leverage the €440bn fund to €2 trillion by using the money as part-guarantees on loans.
Meanwhile, the German language version of the Financial Times is reporting that Wolfgang Schauble, the country's finance minister, has told politicians that the bailout would be expanded to a maximum of €1 trillion.
According to FT Deutschland, the bail-out fund (officially called the European Financial Stability Facility, or EFSF) would be expanded using an insurance model, whereby the EFSF would take the first loss if nations default on their borrowings, rather than private investors like banks.
11.35 European bonds are having a hard time today, after Spain's credit rating was downgraded by Moody's and more investors moved into shares on hopes for a resolution.
Yield, or the amount of interest investors charge to hold the debt, are up on French, German, Spanish and Italian government bonds, with Italy coming close to the danger level of 6pc again, trading at 5.872pc points.
11.30 Looking ahead to the market opening on Wall Street, the futures market is indicating shares will trade slightly higher.
The Dow Jones is expected to open up 0.1pc at 11,541 and the S&P 500 is set to trade flat after yesterday's gains.
10.50 To add to the troubles of European banks, the European Commission has started an investigation into manipulation of the inter-bank lending rate, known as Euribor.
Reuters reports that the London offices of Deutsche Bank have been raided as part of the investigation. Deutsche declined to comment to the news agency.
The Commission said today it had seized documents from institutions active in financial derivative products linked to Euribor because of concerns they may have violated European competition rules
Euribor, which is set by 44 banks, is used to set benchmark interest rates on trillions of euros worth of euro-denominated loans and debt instruments.
10.30 This month's increase in quantitative easing could be just the start, says Howard Archer, chief UK and European economist at IHS Global Insight. He says:
The fact that all nine MPC members favoured a £75bn dose of quantitative easing, and even considered a £100bn helping, reinforces belief that they will be prepared to dish out more stimulus if the economy fails to rally.
We suspect that the Bank of England will feel compelled to enact at least a further £50bn of quantitative easing in the first quarter of 2012 and more could very well follow.
09.45 The Bank of England minutes from the October meeting of the MPC show the committee discussed injecting between £50bn and £100bn of extra money into the economy, before opting for £75bn.
The minutes also cite a sharp deterioration in the international outlook as the key reason for not delaying the decision until the publication of new quarterly forecasts in November.
09.30 BREAKING The Bank of England minutes are out and they show the Monetary Policy Committee voted unanimously to restart quantitative easing with another £75bn of asset purchases, and in fact considered expanding the programme by as much as £100bn.
All nine MPC members voted in favour of more QE and keeping interest rates on hold at 0.5pc.
09.20 An aside to the 08.20 post about Lord Wolfson's £250,000 prize for the person who can come up with an orderly way of breaking up the euro - the Spectator's Fraser Nelson is now offering a bottle of Pol Roger for the person who can give him the best explanation of George Osborne's growth plan...
09.05 Portugal is coming back under the spotlight, after the country said its recession will deepen next year because of the austerity measures brought in by the new government in compliance with the terms of Portugal's €78bn EU-IMF bail-out.
The country's budget deficit was also higher than expected in the first half of 2011 and a mound of previously undisclosed regional debt has been uncovered.
The autonomous island of Madeira has under-reported its debt since 2004, but the island's governor, in post since 1978, said he won't cut any public sector jobs.
The Wall Street Journal reported:
Portugal isn't Greece - yet. But it is only partially in control of its fate.
08.55 European markets have settled higher this morning.
The FTSE 100 is up 0.5pc at 5,438, while the CAC rose 0.7pc in Paris and the DAX climbed 0.7pc.
On the FTSE 100, bank shares were the big gainers, with Royal Bank of Scotland up 3.8pc to 24.63p, Lloyds climbing 3.5pc to 33.18p and Barclays up 2.8pc to 179.95p.
Shares in British Sky Broadcasting were up 3.3pc after the satellite TV company turned in a strong set of first-quarter results despite the expected slowdown in new customers signing up to Sky.
Revenue from the first quarter was up 9 percent to £1.66bn while adjusted operating profit was ahead of forecasts, up 16 percent to £295m.
In the broader FTSE 250, the biggest faller was Argos owner Home Retail, which dropped 13pc to 104.1p after the retailer posted a 70pc slump in first-half profit, with profitability collapsing as its cash-strapped shoppers felt the pain of the economic downturn.
08.40 A bit more detail on the strike in Greece today - the walk-out is due to last for 48 hours, and not just government workers are protesting - shops and bakeries are also closing.
Rubbish is piling up in the streets, dock workers have gathered in Piraeus and prison guards are protesting outside the Ministry of Justice in Athens this morning.
The Greek parliament will hold its first vote on a new package of package of austerity measures tonight, and a second vote on specific requirements tomorrow.
Prime Minister George Papandreou's narrow four-seat majority is expected to be enough to ensure the bill goes through, with some opposition politicians also backing the measures. However, the discipline of the ruling PASOK party has come under increasing strain, with one deputy resigning in protest on Monday.
08.20 An intriguing attempt to solve the eurozone crisis courtesy of Next chief executive and Tory peer Lord Wolfson.
He is offering a £250,000 prize to the person who can come up with way to restructure the euro and allow a failing member state to leave the currency in an orderly way.
Lord Wolfson writes in this morning's Times:
If it is possible that the monetary union cannot survive in its present form, it is vital to explore a way out that protects savings, jobs and financial stability.
With France and Germany reportedly considering expanding the scope of the bail-out fund to cover €2 trillion of liabilities, £250,000 for the winner could be a bargain, depending what answer they come up with ...
08.10 The business pages of this morning's papers have focused on corporate news as well as UK inflation and the eurozone.
The Telegraph: Inflation sparks biggest rates rise in 20 years
The Times: Big companies turn their backs on RBS and LLoyds
The Guardian: Market volatility tips Goldman into third-quarter loss
The Financial Times: Recovery has gone off track, says King
08.05 London markets are open for the day and have followed Asia and the US higher.
The FTSE 100 added 0.7pc to 5,445 points shortly after opening.
07.45 On the agenda today, we have the minutes from the Bank of England's Monetary Policy Committee, which will shed some more light on why the decision to increase quantitative easing was made, and whether any more action is likely.
This afternoon we get inflation data from the US and the Fed's latest Beige Book, which gives an overview of the health of the economy.
And today sees the start of a new general strike in Greece, expected to bring the country to a standstill as the Greek parliament prepares to vote on even more austerity measures.
07.35 Two significant pieces of news came out overnight - first, that Moody's cut Spain's debt rating by two notches.
Secondly, the Guardian reported that France and Germany have come to an agreement to leverage the eurozone bail-out fund, increasing its scope from €440bn to €2 trillion by allowing it to use the money as a form of collateral, to offer guarantees for holders of indebted nations' debt.
07.30 Looking ahead to what's expected in Europe, markets are set to open higher, according to the futures market.
The FTSE 100 is set to open 1.3pc higher while the CAC is expected to rise 1.1pc and the DAX to climb 1.2pc.
07.20 In Asian markets, shares climbed following a positive day of trading on Wall Street, and reports that Germany and France are moving closer to resolving the eurozone debt crisis with an expansion of the bail-out fund.
Japan's Nikkei rose 0.4pc to 8,772.54, Hong Kong's Hang Seng gained 1.6pc and Australia's ASX-S&P 200 added 0.6pc.
The Guardian newspaper reported last night that France and Germany have agreed to expand the rescue fund for nations using the euro common currency to €2 trillion (£1.75).
The paper cited unnamed European diplomats and said European officials are expected to take up the expansion along with a package of other measures at a meeting this weekend.
Wall Street rose sharply on the news.
The Dow Jones rose 1.6pc to close at 11,577.05 and the S&P 500 climbed 2pc.
07.15 Good morning and welcome back to our live coverage of the continuing global debt crisis. Log on throughout the day for the latest news and views.
Read all our latest news on the financial crisis, or take an in-depth look at events over the past month.