Stock markets around the world took a battering as London's main index closed down for the 10th day in a row and US shares retreated.

The FTSE 100 of leading blue-chip shares in the UK sunk into the red for a record-breaking losing streak, ending down 18.5 points at 3,603.7.

Over the last 10 days, the index has shed about 9% of its value and dropped to its lowest level since December 1995.

It reflects the fact that the uncertainty, cost and timing of war is the greater problem than the actuality of war Robert Kerr Bank of America

Across in the US the mood was not much better as the Dow Jones Industrial Average haemorrhaged 238.5 points, nearly 3%, to close at 8,131.

Meanwhile, the technology-dominated Nasdaq index ended down more than 3% at 1,342.15.

The Dow hit a three-month low, while the Nasdaq finished at its lowest level in almost a month.

Fears of a war with Iraq were weighing on traders, already worn down by months of bearish conditions.

"It's brutal, completely brutal," said Anthony Iuliano, head equity trader for Glenmede Trust.

Gold shines

In response, the price of gold, which is seen as a safe haven in times of turmoil, raced up to six-year highs.

It was quoted late in New York at $369.10 an ounce, after rallying to a session high of $369.80.

"The dollar is getting smashed, they are killing the stock market, the war drums are beating and gold is rallying," said Scott Meyers, analyst at Pioneer Futures in New York.

The dollar slumped on Friday, allowing the euro to jump to $1.08, a three-year high against the US currency.

In Europe, the German Dax index of shares closed down more than 3%, at 2,723.27, while France's Cac-40 index lost 0.46% to 2,898.60 points, posting its sixth straight loss on Friday.

London doldrums

The only relief for traders in London was that the FTSE index managed to stay above the key, psychological level of 3,600.

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On Thursday the FTSE 100 ended down 55.8 points at 3,622.2, after its worst losing streak since it was launched in 1984.

Shares climbed when the market first opened on Friday, raising hopes that they would break their losing streak, but then headed downwards later in the day.

At its peak the FTSE 100 touched 6,930 in December 1999.

Some fear the worst is not over and are expecting continued losses early next week.

"We are likely to see further weakness," said Martin Dobson, head of dealing at NatWest Stockbrokers.

"We have not got anything to give this any upward momentum."

War fears

Jitters over a possible war with Iraq has been a consistent factor in the markets' dismal performance.

"It reflects the fact that the uncertainty, cost and timing of war is the greater problem than the actuality of war and what the aftermath will be," said Robert Kerr, European strategist at Bank of America.

Until we have got the UN weapons inspectors' resolution on the Iraqi situation we are likely to drift Martin Dobson NatWest Stockbrokers

"I see the market oscillating with volatility back at high levels, and we are going to bump into territory where there are forced sellers," Mr Kerr added.

Such sellers could include big institutions such as insurance companies which are compelled to sell their share portfolios to meet financial solvency requirements.

Traders are also awaiting the release of a major report by Chief UN weapons inspector Hans Blix on Monday.

"Until we have got the UN weapons inspectors' resolution on the Iraqi situation we are likely to drift," said NatWest's Mr Dobson. "It could still drift on after that."

In London, a drop of almost 4% for drugs company GlaxoSmithKline, following a setback to its asthma drug Serevent, also dragged the FTSE down.