Cost of world's share shakeout is £2.7 trillion

Investors are bracing themselves for one of the most difficult years in stock market history after new figures showed more than $5 trillion (£2.7 trillion) was wiped off the value of shares across the globe in January.

The loss represents one of the worst starts to a year since records began - a stark indication that markets anticipate a global recession that could last for several years.

Analysis by Standard & Poor's shows that only two stock markets managed to show any gains at all, with emerging markets lurching into crisis and the main indices in New York and London not far behind.

"If investors thought the market could only go up, January's wake up call pulled them back into reality," said the credit ratings agency.

In London, the FTSE 100 lost £77 billion on one day alone - 21 January - in frenetic dealing dubbed a second Black Monday after the great crash of 1987.

Although shares have since stabilised somewhat, there is little but bad news emerging from the largest financial institutions at the heart of the global economy.

Yesterday AIG, the world's biggest insurer, admitted its auditors had found "material weak-nesses" in its accounting systems, cutting the value of some of its insurance contracts by $5 billion. AIG shares fell 12% - losing $15 billion. Similar revelations from rivals are likely, leaving the banking and finance sector in turmoil.

The S&P report emerged just after finance ministers from the G7 group of leading industrial nations said losses from the US subprime mortgage crisis could reach $400 billion. The most pessimistic economists predict writedowns will be closer to $1 trillion, but analysts note the estimates are only moving higher.

S&P analyst Howard Silverblatt said: "There were few safe havens as 50 of the 52 global equity markets ended the month in negative territory, with 25 of them posting double-digit losses."

Only the little-noticed Moroccan and Jordan markets rose.

Silverblatt added: "High volatility, quick turnarounds in both the market and investor sentiment and drastically lower stock prices prevailed."

MONTH OF MISERY

Turkey down 23%
China down 21%
Russia down 16%
India down 16%
Paris down 12%
London down 9%
New York down 6%