COULD another world economic crisis be on the cards after this week’s dramatic movements on the global stock markets?

The FTSE steadied at its lowest level in more than three years, after the turmoil of Wednesday's sell-off which saw £52billion wiped off the value of top-flight shares.

The FTSE 100 Index was up 25.6 points to 5699.5 in the wake of the market officially slumping into bear market territory in the previous session - falling 20 per cent from last April's all-time high of 7104.

Some commentators said the conditions were right for a global economic crisis.

We have been asking financial experts locally for their views, which they stress should not be taken as investment advice.

Kevin Forbes, chairman of the Hampshire and Dorset Personal Finance Society and partner in Strategic Solutions Chartered Financial Planner in Poole, said what the markets were experiencing was volatility rather than risk.

“Technology has increased the volatility of all investments. That is here to stay. This leads to heightened emotional responses and big 'momentum' swings,” he said.

“Valuations go up too much when investors fear 'missing out' and prices go down too much when investors fear losing too much.”

He said the current weaknesses in the market reflected growth in the US, which had “fallen to stall speed”, and the plunge in oil prices. “China stock markets we believe is a lesser issue, but gives more emotive news stories,” he added.

“Investors should be more concerned with China’s foreign exchange policy, which is critical for the health of the global economy, than the decline of its stock market,” he added.

The Chinese currency, the renminbi, had been allowed to depreciate against the US dollar, and the market had been “highly sensitive to this trend”.

“So we would say if you are a long term investor, we may be entering a 'hold on to your hats' period of upward and downward swings. Take professional advice, try to ignore the noise you hear and think through what your long term goals are and what the short term effects are of this volatility,” he added.

Nick Fernyhough, partner at Saffery Champness in Bournemouth, said the UK was a net importer of oil and not a massive exporter to China.

 “But what we have learnt, particularly since 2008, is that we are all driven by global markets and the low oil and commodity prices, coupled with the downturn in China has caused problems in many economies across the world,” he said.

“So we cannot just look at ourselves and think we will be OK. It would be nice to think we are better placed to withstand these worldwide tremors than we were in 2008 when our own banking problems were such a large contributor to the problems.

“What we have also learnt is that it is almost impossible to predict what will happen next – few foresaw the serious UK banking problems, or house price corrections at that level. The worst thing that could happen is a panic which creates a self-fulfilling downturn.”

Scott Jones, divisional director at Investec Wealth & Investment in Bournemouth, said fears of a global recession had left investors “hyper sensitised to China’s situation and motives”.

He added: “The stock market gyrations, when combined with a renewed weakening of the yuan/dollar exchange rate over the Christmas period, revived suspicions that China is in serious trouble. Compounding these China-sourced growth concerns have been the continuing sharp declines in many commodity prices, most notably oil. Until very recently falling commodity prices have been a ‘good thing’ since they act as a global tax cut - but you can have too much of a good thing.

“In short, our view is that these fears are overdone and share markets will regain their poise. The positives of solid economic performance, particularly in the US and Europe, good corporate health, supportive monetary policy, low inflation and reasonable valuations for risk assets have been temporarily forgotten. We are certainly not dismissive of the darkened mood in markets, but our investment perspective on the most recent volatility is best summarised as ‘shaken, not stirred’.”

Gary Neild, MD of Blue Sky Financial Planning in Poole, said: “There has been no end of speculation as to what the latest downturn means for the global economy and stock-markets. Views range from ‘we’re doomed’ to ‘what a fantastic buying opportunity’.

“Unfortunately, it is the extreme views which seem to attract most attention. Convenient superficial labels are often attached to why markets regress but the real truth is more complex.”

He said economies were entering a period of lower and slower growth but many were in better health than several years ago.

“They key to investing is choosing the right asset classes at the appropriate stage of the economic cycle. In our view this is more important than choosing a fund,” he said.