European markets volatile despite move to shore up Italy and Spain

EUROPEAN financial markets piled up more losses today as emergency action to shore up Italy and Spain failed to prevent further turmoil.

In a volatile session, the FTSE 100 Index was down another 2 per cent at 5143 as investors prepared for a sharp fall on Wall Street after Standard & Poor's historic decision to strip the US government of its prized AAA credit rating.

There had been a brief rally for the FTSE 100 after the European Central Bank intervened in the markets for Italian and Spanish bonds, helping to reduce borrowing costs in both countries.

Finance ministers from the world's major economies also vowed to take "all necessary measures" to support financial stability and growth.

The action by the ECB was well-received by battered UK banking stocks, but with the Dow Jones Industrial Average likely to open more than 200 points lower it was not long before earlier gains were wiped out.

The London market lost 10 per cent of its value last week as nearly 150 billion 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 two per cent lower earlier 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."

Chancellor George Osborne urged all eurozone countries and institutions to deliver on their promises to restore financial stability, but warned that far wider "decisive, co-ordinated action" will be needed for a permanent solution.

Writing in the Daily Telegraph, Mr Osborne said it was time for eurozone countries to accept the "remorseless logic of monetary union that leads from a single currency to greater fiscal integration" - possibly including the creation of eurobonds backed by the whole 17-nation bloc rather than individual states.

Britain cannot be "immune" from the instability on its doorstep, but market confidence in the Government's deficit reduction strategy had made it "a safe haven in the storm", he said.

EUROZONE CRISIS: MORE COVERAGE

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