Respite as FTSE rises slightly

An uneasy calm descended on the London market following yesterday's panic-driven slump of 4.7% or 246 points, with the FTSE 100 Index opening 1%, or 60 points, higher.

Yesterday's rout was triggered by alarm over the US Federal Reserve's gloomy view of the economy and its failure to inspire traders with new emergency measures, including a process dubbed Operation Twist.

Wall Street's Dow Jones Industrial Average finished 3.5% lower last night, meaning it has lost 6% of its value in the last two days, while Hong Kong's Hang Seng index fell 1.9% after losing nearly 5% the day before.

Traders warned that any rally may prove short-lived until there is a political consensus on how to solve the problems in the euro-zone and in many of the other developed economies.

Chris Weston, a trader at IG Markets, says: "Unfortunately for the market, a lack of political leadership seems to be one of the biggest reasons as to why we can't make any meaningful inroads into solving this crisis."

Cameron calls for action

Last night Prime Minister David Cameron joined forces with the leaders of five other G20 countries to call for decisive and co-ordinated action from the world's leading nations to help the global economy recover from recession.

An open letter to French and current G20 president Nicolas Sarkozy urged the eurozone countries to act swiftly to resolve the crisis in the region, where Greece remains teetering on the brink of a debt default.

The letter said the global economy needed a swift solution to the euro crisis, while it also called for countries with trade surpluses to boost domestic demand and a global deal to remove trade barriers.

It followed grim warnings about the health of the global economy from both the heads of the World Bank and the International Monetary Fund.

Robert Zoellick, president of the World Bank, says the global economy is now in a "danger zone".

Global markets had surged in previous days on hopes that the Fed might embark on a third package of quantitative easing, but Operation Twist, designed to keep US interest rates lower for longer, was met with worldwide disappointment.