EUROPEAN shares plummeted in the wake of the terrorist attacks in the US.

About £67bn was wiped from the value of the FTSE 100 Index as the City showed its horror at what was happening across the Atlantic.

The Footsie suffered its biggest one-day percentage fall since 1987, closing down 287.7 points at 4746.0, as panicked City dealers sold shares in droves.

Trading continued via computer screens despite the London Stock Exchange (LSE) being evacuated and exchanges on Wall Street remaining closed.

The closing price represented a 5.7 per cent fall and took the index to its lowest since October 1998.

The wiped-out World Trade Centre housed numerous brokerages and investment firms, as does the nearby World Financial Centre.

The terrorist attacks could not have come at a worse time for the market, which was just recovering from dramatic falls on Monday, when the FTSE-100 dived through the 5000 barrier, before rallying in early trading yesterday.

Jeremy Batstone, of Nat-West Stockbrokers, said: "The London market was up about 60 to 70 points before - now look at it."

Mike Lenhoff, at broker Gerrard, said: "It's a disaster. It throws the whole market background into chaos. The Pentagon has been bombed and nobody really knows the American policy response, which I think is going to be pretty severe, once they feel confident about who is responsible.

"Banks and insurers will fall the most - anything that is exposed. Oil stocks will do well and oil prices are rising. The oil price is now almost 30 dollars a barrel compared with 27.50 dollars earlier this morning."

In London, shares in airlines, banks and insurers dived.

British Airways, BAA, Ryanair, and EasyJet all fell heavily, while among the banks Lloyds TSB, Barclays, HSBC and the Royal Bank of Scotland fell.

In the City of London, financial workers watched in disbelief as events in the US unfolded. Financiers and lawyers, working in or near the LSE, spoke of their shock as they watched the TV footage in bars and pubs.

Lorenzo Codogno, head of Euro Zone Research at the Bank of America, said: "The reaction was immediate. Everybody dropped what they were doing and followed what was happening on TV.

"We are all concerned about what is happening. The main feeling is of disbelief."

A spokeswoman for HSBC bank said it has a branch based at the concourse of the World Trade Centre. It could not say how many staff were there or what the effect on staff was.

One London economist said: "Action like this strikes at the heart of capitalism. Markets have been falling recently because of fear and this will add an extra layer to that.

"It does raise fears of an escalation or a return to a more serious risk of war, given the scale of the disaster.

"London is just in freefall - people are gathering around TV sets trying to take it all in. Nothing is happening."