European markets bounce back

European markets made a tentative recovery this morning after fears over France's credit rating triggered losses across the globe.

Rumours that agencies were planning to take away France's Triple A rating were denied and President Sarkozy moved to reassure investors, which lifted stocks.

The intervention came after the country's banks took a battering yesterday with Societe Generale diving by 23 per cent at one stage and closing 15 per cent down.

This morning it bounced back by six per cent, reflecting a general improvement in sentiment and fuelled by the bank dismissing as "absolute rubbish" claims that it has liquidity problems. The Eurozone's blue chip Euro STOXX 50 index was up 2.9 per cent.

Meanwhile the FTSE 100 opened up in early trading. Interdealer broker Icap led the climbers, up more than three per cent. Satellite navigation expert Inmarsat, lifted by just over three per cent as Citigroup raised its rating to "buy" from "hold" in the wake of recent hefty share price falls.

Miner Kazakhmys nudged up by more than two per cent as positive export data from China suggested demand for raw materials would be strong.

Chipmaker Arm Holdings was up by a similar level. Tate & Lyle also put on more than two per cent.

Banks, which were under heavy pressure yesterday as a result of the French financial sector's problems, also started on the front foot today. Lloyds was up more than two per cent, HSBC 2.5 per cent and Barclays 1.4 per cent. RBS edged up slightly although lagged behind the others.

Asian shares rallied slightly before close after fears over the credit rating of France had dragged markets down.

Stocks pulled back from initial steep falls, with Japan's Nikkei 225 index recovered from an opening fall of 1.8 per cent to close 0.79 per cent lower.

Hong Kong's Hang Seng was down 1.3 per cent.

Highlighting the fragility of investor sentiment, the gold price hovered around record highs.

US economic data will come into focus later with weekly jobless claims as well as June trade balance figures.