Jittery European markets make small gains

Fears of a global recession and another woeful session for banking shares did not stop the London market from making nervous gains today.

The FTSE 100 Index gained 1% to close up 54.5 points at 5095.3 despite banking shares taking another hammering amid fears of contagion from the eurozone debt crisis and weaker prospects for the world economy.

Taxpayer-backed Royal Bank of Scotland was the biggest loser, falling 5% to 19.7p - the first time they have closed below 20p since March 2009.

The Government paid 50p per share for its 82% stake, meaning it has currently lost some £27 billion of its £45.5 billion bail-out money.

Taxpayer backed Lloyds Banking Group was down 0.8p at 27.6p, and Barclays was off 4.3p at 146.3p.

Despite today's rises, markets remain jittery after last week's poor economic data from the US and eurozone created fresh panic about the prospect of a global recession.

The glut of bad news caused London's blue chip index to suffer its biggest daily loss in nearly three years on Thursday, wiping £62.3 billion from the value of the UK's 100 biggest companies.

In another session of volatile trading today, London's leading shares index slid nearly 1% at the start - taking it below the 5000 mark - but it bounced back shortly afterwards.

Gold continued to hit new record highs, rising to 1,895 US dollars (£1,151) per ounce, because it is seen as a safe haven amid the market turmoil.

Brent crude oil prices fell nearly 2% to 107.6 US dollars (£65.4) a barrel, on speculation that Colonel Muammar Gaddafi's 40-year rule in Libya is on the edge of collapse, which traders think could reopen supplies from the war-torn country.

The CAC 40 in France was up 1% but the DAX in Germany closed down 0.1%. The Dow Jones Industrial Average in the US made gains of 0.5% as the London market closed.

Markets have swung wildly in recent weeks as figures revealed the pace of economic growth in countries such as the US and Germany has slowed, leading to fears that the global recovery is running out of steam.

A report by Morgan Stanley last week added to the jitters when it said the global economy is dangerously close to a recession.

Fears about the strength of the world's biggest economy were heightened by a rise in the number of jobless claimants and weak manufacturing and home sales figures.

There are also unresolved worries about the eurozone debt crisis after French president Nicolas Sarkozy and German chancellor Angela Merkel failed to back eurozone bonds to fix the current problems at an emergency meeting.

Markets are now focused on European manufacturing data, due to be released tomorrow, while a talk by US Federal Reserve chairman Ben Bernanke on Friday will be watched keenly for any indication that a third round of quantitative easing, or money printing, could be on the cards.

Ben Potter, market strategist at IG Markets, warned there could be further volatility in store and said "markets are going to remain at the mercy of fickle sentiment and confidence".

He added: "All eyes are on Fed chairman Bernanke and what he has, if anything, in his basket of tricks to help the global economy."

PA