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Last Updated: Friday, 8 July, 2005, 16:01 GMT 17:01 UK
Markets recover from UK bombings
Investors chat in Taipei
World markets have swung from high to low and back again
UK and European shares rebounded on Friday, erasing the previous day's losses caused by bomb attacks in London that killed at least 50 people.

London's FTSE 100 added 73.9 points, or 1.4%, to 5,232.2. Paris's Cac 40 and Frankfurt's Dax both rose over 1.5%.

The British pound, however, continued to slide, hitting an 19-month low against the US dollar and taking its decline to 5% in the past two weeks.

Crude oil prices rose, while European bonds and gold slipped.

The London Metal Exchange did not open its trading floor for business on Friday because it is within a police exclusion zone.

The commodities exchange, which was one of a number of City buildings evacuated on Thursday, can also trade electronically.

Resilient

As news of the bombings emerged on Thursday, the FTSE 100 tumbled as much as 3.5% in 90 minutes, its steepest fall since the start of the Iraq war.

The slump wiped more than 44bn off the value of the stocks in London.

For a time the London Stock Exchange asked its member firms to switch off all automated trading systems.

"It was manic yesterday when the electronic trading systems were turned off," said one trader at HSBC.

"We had to trade manually and the phones went berserk.

By Thursday afternoon the FTSE bounced back from its worst levels to close just 1.4% lower at 5,158.

Limited effect

Despite initial concerns about the economic impact of the London attacks, traders and investors said that any market decline was likely to be short-lived as the threat passed and the extent of damage became clearer.

Unfortunately we expected it to come
Andrea Williams, Royal London Asset Management

"People cope okay with good and with bad news, but they don't cope well with uncertainty, and that was the problem on Thursday," said David Buik at financial bookmaker Cantor Index.

"Now there is a feeling that there is some level of control," he added.

Industries that were hardest hit on Thursday led the rally on Friday, with insurance firms and airlines bouncing back.

Analysts said that the economic effect of the bomb blasts was likely to be limited and companies were well prepared to deal with any disruption.

"Unfortunately, we expected it to come," said Andrea Williams, head of European equities at Royal London Asset Management.

"It came and it doesn't really affect economic growth. This is something which you have to price into the markets."

Worldwide

Share indexes in the US were little changed overnight, with the S&P 500 and Dow Jones indexes both adding 0.3%.

In Asia, the Tokyo's Nikkei 225 index lost 0.2%, Hong Kong's Hang Seng slid 0.5% and Sydney's main index shed 0.1%.

The UK pound fell 0.5% to $1.7363 on Friday as investors bet that the Bank of England was likely to cut interest rates in August.

It left the key interest rate at 4.75% on Thursday, resisting increasing calls from retailers and business leaders to cut borrowing costs amid evidence that consumer were spending less and the economy was slowing.

Also impacting the pound were unfounded rumours that the Bank of England planned to hold a crisis meeting to consider an emergency rate cut in response to the London bombings.

"It's important to see how these events affect the British economy and global security in the longer term," said Kikuko Takeda, currency analyst at Bank of Tokyo-Mitsubishi.

European bonds fell in early trading on Friday as many investors moved out of the so-called havens they had sought safety in on Thursday.




MARKET DATA - 11:36 UK

FTSE 100
5429.64up
23.70 0.44%
Dax
5733.05up
19.54 0.34%
Cac 40
3784.02up
14.48 0.38%
Dow Jones
10403.79up
78.53 0.76%
Nasdaq
2273.57up
35.31 1.58%
S&P 500
1115.71up
11.22 1.02%
BBC Global 30
5707.15up
20.65 0.36%
Data delayed by at least 15 minutes



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