From the Financial Times:

Fresh turbulence hit financial markets on Tuesday as warning signs mounted for the US housing market and fears about the fallout from the crisis in credit markets drove volatility.

Sentiment darkened on the news that Federal Reserve policymakers had acknowledged that deteriorating financial conditions “might require a policy response” even before it moved to staunch a liquidity crisis by lowering the rate at which it lends to banks.

The S&P 500 suffered its worst day for three weeks, falling by about 2.3 per cent while investors fled to the safety of treasuries. The dollar fell Y1.5 against the yen to Y114.3, close to its low for the year.

New figures suggested an acceleration in house price depreciation while consumer confidence suffered its worst fall since the aftermath of Hurricane Katrina two years ago.