Fears of a US recession grew yesterday, sending shares sliding again in London and New York, despite plans by President Bush to bolster the American economy with a cash handout to millions of people.

A White House announcement by the President of $140 billion (£71.5 billion) proposals that could see millions of taxpayers handed election-year cheques of up to $800 did little to quell markets’ anxieties over a darkening economic outlook for America and the rest of the world.

Shares sank for another day on both sides of the Atlantic, extending vicious losses that have seen edgy stock markets battered by the worst start to the year for decades as Mr Bush’s statement failed to soothe investors’ nervousness over worsening prospects.

In London, where worries over deteriorating economic conditions were deepened by news of grim trading conditions on Britain’s high streets last month, blue-chip shares ended down for a fourth session in a row.

Much worse than expected official retail sales figures showed that the amount of goods sold on high streets last month tumbled by 0.4 per cent, cutting annual sales growth to 2.7 per cent, the lowest level for 15 months. Sales at department stores plunged.

The London market woes were aggravated by an escalating panic among investors over a slump in the commercial property market, which saw millions wiped off the value of a leading investment group, New Star Asset Management.

The FTSE 100 index closed down just a fraction, but capped losses of almost 5 per cent for the past week after a series of brutal sell-offs, in its worst week’s trading since the money market turmoil that sparked the Northern Rock debacle in early August. The index is now down by 9 per cent since the start of the year, in its worst performance for this period since it was set up in the early Eighties.

In New York, Wall Street took little comfort from either President Bush’s move to jump-start talks with the US Congress over a tax and spending package to reinvigorate American growth, or signals from the Federal Reserve that it will cut US interest rates at the end of the month and take further aggressive action to buoy activity.

Leading US shares succumbed to another day of steep losses, with the Dow Jones industrial average tumbling by 100 points, or 0.8 per cent, by late afternoon in New York, and the broad-based S&P 500 index of US blue-chip companies down even more sharply, by 1.3 per cent.

Unveiling his ideas for tax moves to deliver a “shot in the arm” to the faltering US economy, Mr Bush attempted to reassure fretful Americans and the markets that these would be effective.

“This growth package must be built on broad-based tax relief that will directly affect economic growth and not the kind of spending projects that would have little immediate impact on our economy,” he said. “This growth package must be temporary and take effect right away so we can get help to our economy when it needs it most.”

The President’s statement preempted his annual State of the Union address to Congress as he reacted to the clamour for action. It is thought that an eventual deal with Democrats and Republicans in Congress could see US taxpayers handed back as much as $800 each in rebates — more than double the $300 paid out to bolster growth during the last, mild US recession in 2001.

Wall Street was left disappointed with the scale of the likely package, worth about 1 per cent of US GDP, with markets fearful that it may not be enough to avert a recession that some economists believe may already have started.

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