MR Alan Greenspan, chairman of the US powerful central bank sent Wall Street plunging for a second time yesterday with a warning that soaring share prices meant "caution seems especially warranted".

After the remark the Dow Jones crashed over 120 points, but the losses were gradually trimmed and the market closed down 55.03 points at 6983.18.

Mr Greenspan last sent world markets into turmoil on December 5th with his now famous comment about "irrational exuberance" driving soaring Wall Street prices.

Yesterday he told Congress in Washington he could not rule out a pre emptive increase in US interest rates to hold both economic growth and prices in check.

Economists said he was trying to dampen market enthusiasm now in order to avoid an even sharper pull back later. "He's warning that if Wall Street doesn't correct itself, he will correct it. And he has the power to do that by raising short term interest rates," said an economist.