The looming spectre of a global flu pandemic dragged most equity and commodity markets lower yesterday and risk aversion remained elevated following reports that Bank of America and Citigroup could need to raise billions of dollars more in capital as a result of the US government's stress tests.

“This scare is hitting the world economy at a bad time,” said Gerard Lyons, chief economist at Standard Chartered Bank: “One of the factors that will heavily influence the timing of the end of this global recession is confidence and a health scare such as this will hit confidence.”

Commodity markets potentially affected by swine flu continued to weaken yesterday with prices for animal feed, such as soyameal, falling. Lean hog prices have dropped more than 7 per cent this week and crude oil fell by about $1 a barrel, remaining below the $50 a barrel level amid concerns about transportation demand.