The Dow Jones index suffered its biggest ever one-day points loss on Monday and the FTSE hit an eight-year low as markets were gripped by mounting concerns over the threat of a global recession, despite a coordinated effort by central banks to protect growth and jobs.

In an escalation of the worst turmoil since the 2008 financial crisis, stock markets suffered further sharp losses on Monday despite dramatic action taken by the US central bank late on Sunday in an attempt to limit the economic impact of the coronavirus pandemic.

Trading on Wall Street was temporarily suspended for the third time in seven days, which happens when the market falls by more than 7%. The Dow Jones Industrial Average closed down almost 3,000 points, or 12.9%, ending the day at 20,188 points. The S&P 500, Wall Street’s benchmark index, also closed down 12%.

In London, the FTSE 100 index tumbled almost 8% in early morning trading, taking it below the 5,000 level to 4,898, its lowest since October 2011, before recovering some ground to close down 4% at an eight-year low of 5,151, wiping nearly £54bn off shares.

The sharp falls on global markets came after the Federal Reserve slashed interest rates to near zero in an unprecedented attempt to shore up the US economy late on Sunday, while the International Monetary Fund said it stood ready with $1tn (£820bn) of lending capacity to help countries around the world deal with the escalating economic shock.

Donald Trump warned that the US may be in recession as the virus drags down the world’s largest economy. However, once the virus “goes away”, the US will see a tremendous economic surge, he insisted.

Andrew Bailey, the new governor of the Bank of England, dropped a heavy hint that Threadneedle Street would step in with further support for the British economy after slashing interest rates last week alongside the government’s expansionary budget.

Speaking on his first day as governor after replacing Mark Carney, Bailey said the Bank wanted to minimise the lasting damage to Britain, adding: “That’s why you saw prompt action last week, that’s why you will see prompt action again when we need to take it. The public can be assured of that.”

As investors rushed to buy assets considered as safe havens in times of stress, including US and German government bonds, shares across Europe fell under heavy selling pressure.

Stocks in Germany tumbled by 5% and there were losses of 8% in Spain, 6% in Italy and 6% in France. Asian stock markets had plummeted earlier, with Japan’s Nikkei down by almost 2.5%, Hong Kong’s Hang Seng by 3.7% and Australian shares by almost 10%.

“As the last few weeks have unfolded, there has been a growing fear that the world faces a perfect storm,” said Paul Markham, global equities portfolio manager at the asset manager Newton Investment Management. “A strong nerve will be required and it may well get darker before we see the light.”

After the second emergency rate cut by the Fed, economists warned there was little central banks could do to prevent a global recession as efforts to contain the virus disrupted company supply chains and dragged down consumer demand.

With interest rates still close to the lowest levels on record following the financial crisis a decade ago, there are concerns that central banks have limited ammunition left to provide further support, as the economic downturn intensifies amid fears the Covid-19 outbreak could last until spring 2021.

The Fed slashed rates to 0-0.25%, the lowest rate in its history, and said it would buy $700bn in government bonds as it attempts to head off a severe slowdown.

In coordinated action between major central banks around the world, the Reserve Bank of New Zealand and Bank of Japan also stepped in with emergency measures, while the Bank of England was among six global central banks to unleash combined efforts to smooth volatile trading on financial markets.

Neil Shearing, group chief economist at the consultancy Capital Economics, said governments and central banks could do little to stop a recession, but could prevent it from turning into a repeat of the 2008 financial crisis or the economic depression of the 1930s.

“Things are getting ugly,” he said, adding: “History suggests that equity markets are only likely to bottom out when it becomes clear that the flow of new cases of the virus has peaked. Until this happens, we should expect stock markets to remain under pressure.”

Data from China showed industrial production declined by 13.5%, with investment levels in the Chinese economy tanking by a quarter and retail sales falling by a fifth in February, as the coronavirus outbreak brought the country to a standstill.

The pandemic is taking a mounting toll on businesses, with a number of warnings from companies on Monday. Airlines and travel companies led the fallers on the blue-chip FTSE 100 index, with holiday travel company Tui collapsing in value by 38%. Over the weekend, Tui announced it was temporarily suspending the “vast majority of all travel operations until further notice”.

Ryanair, Europe’s largest short-haul airline, cancelled 80% of its flights until May and said it had not ruled out a “full grounding of the fleet”.

Amid growing calls for governments to step in with support for airlines to save vast numbers of jobs across the industry, the owner of British Airways, IAG, and easyJet, Europe’s number three and number four airlines respectively, also said they would cut capacity drastically.

UK retailers and Kingfisher warned that the pandemic would hit sales following store closures in Europe, while betting company Flutter issued a profit warning.