Markets mixed in volatile trade

LSE

London shares have been volatile throughout Tuesday trading.

World stock markets were mixed in volatile Tuesday trading with investors continuing to worry over the strength of financial institutions.

London’s FTSE 100 index rallied despite banking shares taking a hammering. Royal Bank of Scotland – which lost 40% at one point – was down 35%.

Having shed 7.8% in the previous session, the key London index was up 1.5%. France’s Cac 40 index added 2%.

In early US trading the Dow Jones index added 0.6%, but the Nasdaq fell back.

Earlier, Asian markets were mixed as traders reacted to the turmoil.

Japan’s Nikkei 225 index sank more than 5% – below the 10,000-point barrier – before recovering slightly to close down 3%.

However, Australia’s financial markets rallied after the country’s central bank cut its official interest rate from 7% to 6%.

‘Recession arrived’

A shortage of capital is a big issue for banks…but the really big issue is the breakdown of wholesale markets

Robert Peston
BBC business editor

The market moves came amid developments including:

  • The US Federal Reserve announced plans to buy massive amounts of short-term debt from companies in an effort to unfreeze the money markets
  • The Icelandic government took control of the country’s second biggest bank, Landsbanki, which owns UK internet bank Icesave

  • European Union finance ministers agreed to increase the guarantee for customers’ bank savings accounts to at least 50,000 euros

  • Taiwan became the latest country to say that it would fully protect depositors’ savings should a bank fail
  • The British Chamber of Commerce said that the UK was already in recession

  • The BBC’s business editor Robert Peston learned that a trio of leading UK banks had met with Chancellor Alistair Darling and told him they were disappointed he had not presented a fully elaborated banking rescue plan

  • Australia’s central bank trimmed interest rates from 7% to 6% – despite inflation being well ahead of government targets

  • Moscow’s two main stock exchanges opened several hours late on Tuesday having had suffered heavy losses on Monday.

In a choppy day in London, the FTSE 100 index was up 66.8 points at 4,656 after some of its early gains evaporated.

Its 391-point drop on Monday had already wiped £93bn from the value of London’s leading shares.

France’s Cac-40 index, which lost more than 9% in the previous session, surrendered some of its early gains, but was 70 points ahead at 3,781, while Germany’s Dax index added 1.7% to 5,478 points.

On Wall Street, the Dow Jones , which had lost 370 point son Monday, was slightly higher at 9,964.

Earlier, The Nikkei index lost 317.2 points to end at 10,155, while Hong Kong’s Hang Seng ended 5% lower.

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