FTSE stages late fight-back

UK blue chip stocks were hit by another volatile session today as the eurozone crisis continued to overshadow trading.

The FTSE 100 Index traded below 5000 at one stage, but later staged a late session fight-back to close just 10.2 points lower at 5062.9.

Concerns lingered over Europe despite news that Germany approved its share of the 750 billion euro (£654 billion) bail-out.

Market woes were compounded by heavy falls amid banking stocks after US senators voted for a crackdown on Wall Street.

However, steadier trading in America helped pull the FTSE 100 out of its tailspin with the Dow Jones Industrial Average in the US up around 1% soon after opening.

It has been a turbulent week for global stock markets since Germany's surprise move on Tuesday to ban speculators from betting against the eurozone.

London's benchmark share index has lost more than 10% in little more than a month after reaching a 22-month high in April.

This week alone, the market has lost around more than 200 points in just three sessions.

City Index analyst Joshua Raymond said: "There are two key issues that investors have become increasingly sensitive about - how wider EU sovereign debt could impact economic growth for several years and the potential for stricter financial regulation.

"It is these two key issues that have taken even more of a knock in confidence this week and have had investors running for the hills."

Heavyweight banking stocks - including part-nationalised Royal Bank of Scotland and Lloyds Banking Group - were among the biggest early session casualties in London, although they later regained their poise.

A raft of other major blue-chips such as beleaguered oil giant BP remained deep in the red as investor nerves were frayed.

Crude oil is now trading below 70 dollars a barrel from highs above 87 dollars at the beginning of May amid concerns that Europe's financial crisis may stifle a global economic recovery and depress demand.

Although German politicians passed a bail-out for the eurozone today to stave off a sovereign debt default, concerns remain that deep spending cuts in Greece, Spain, Italy and Portugal to tackle deficits will cripple growth.

Anthony Grech, head of research at IG Index, warned that volatility may stalk markets for some time.

He said: "The last time the UK stock market was down at these levels, the market saw real value in stocks and the recovery continued."

He added: "This time we have a completely different economic backdrop and it would be naive to think we have seen the back of the volatility - in the short term at least."