The FTSE 100 zig-zagged this morning as decisive action from the European Central Bank (ECB) to buy up Spanish and Italian government bonds boosted the share prices of Britain's banks but concerns remained about the outlook for the global economy.
Lloyds Banking Group led the risers, jumping by 6 per cent as investors gained confidence that Europe's debt crisis had a better chance of being contained as a result of the ECB's latest intervention, reducing the chance that banks would be overwhelmed with bad debts. Royal Bank of Scotland's shares were another key beneficiary, rising by nearly 4% the morning after a rare conference call by the ECB's governing council resolved to intervene "significantly" to protect Italy and Spain from the debt crisis.
Both banks fell sharply last week, as the blue-chip index experienced its worst week since Lehman Brothers collapsed almost three years ago, falling 9.7 per cent and wiping £148bn off its stocks.
In the first day of trading since Standard & Poor's took the dramatic step of downgrading America's Triple-A sovereign debt rating, the FTSE 100 opened down 66 points, before staging a rally that took it into positive territory. The index quickly fell, however, to stand down 45 points, or 0.85%, at 5,204 points dragged down by mining groups as commodities fell amid concerns about demand in a slumping economy. Eurasian fell by 4.0%, Kazakhmys was 3.67% lower and Xstrata was off 3.38 per cent.
Richard Hunter, head of UK equities at Hargreaves Lansdown, said: "The main thing is the slight improvement in the Italian and Spanish situation. That rare piece of good news has certainly given us a fillip, at least in the short term."
