European markets pull out of nosedive

Traders had been braced for another session of woe after Standard & Poor’s historic decision to strip the US government of its prized AAA credit rating.

The FTSE 100 Index initially fell by more than 1 per cent but this was short-lived as London and markets in France and Germany found positive territory.

The respite comes after the European Central Bank (ECB) signalled it would intervene in the markets for Italian and Spanish bonds. Finance ministers from the world’s seven biggest economies also broke off from their summer holidays to agree to ensure liquidity to help markets operate smoothly.

Banks were among those reassured by the actions of the ECB, with Lloyds Banking Group and Royal Bank of Scotland both 6 per cent higher after suffering heavy losses last week.

The London market lost 10 per cent of its value last week as nearly £150bn was slashed from the value of the UK’s 100 biggest companies in its worst period of trading since the autumn of 2008.

The continued market turmoil has been bad news for millions of savers who will have seen their pension funds hit dramatically.

Japan’s Nikkei finished more than 2 per cent lower today as Asian markets caught up with the sell-off seen on European markets on Friday afternoon.

Meanwhile, the safer haven of gold pushed to a new record high of over 1,700 US dollars per troy ounce today.

Richard Hunter, head of UK equities at Hargreaves Lansdown stockbrokers, said: “Turbulence remains likely until such time as there are some concrete debt proposals from the US and the eurozone, where potential contagion remains an issue.”