Global Stocks Sink But FTSE Gains Ground

London's FTSE 100 has managed to make modest gains, as stock markets in Europe and the US remain on a downward trend.

After a spectacular rally in the morning, the FTSE fell back again in the afternoon, but closed the day up 54 points, or 1%, at 5156.

Analysts said bargain-hunting had helped boost a nervous session.

It came after the FTSE 100 share index lost £82bn of its value over the past two trading sessions.

In contrast, the FTSE's German and French counterparts both fell by around 1%.

Over the in US, investors were still catching up from heavy global market falls on Monday - which was the Labour Day bank holiday in America.

The Dow Jones Industrial Average fell 2.6% in the first few minutes of trading and made little in the way of gains in later hours.

Meanwhile, gold, a traditional safe haven in times of trouble, reached a new record high of $1,920 on Tuesday.

It signalled another day of market volatility, but by the end of the day gold had dropped back again.

The expectation is that sovereign debt troubles within single currency nations, especially Italy and Greece, are deteriorating and could trigger a second banking crisis.

British banks such as RBS have been among the stocks feeling the most pain while Italy's 10 year debt yield has risen for a record 12th straight session.

A general strike, called in protest at austerity by Italy's biggest union today, may have added to the lack of confidence in Rome's ability to meet its financial goals.

Italian bank shares continue to be punished while its main stock market is now at levels not seen since 2009.

In the wider markets, there was a shock announcement that the Swiss central bank was pegging its franc, seen as a safe haven like gold, to the euro at 1.20 francs per euro.

Appreciation in the Swiss currency had hurt the country's exports.

In Asia overnight, the Nikkei fell 2.2% while the Hang Seng gained 0.5% as it tracked early moves in Europe.

Stockbroker Tony Craze of Dawn Traders told Sky News it has been amazing to see the panic, given that little has changed in the past 18 months.

"We have been saying for ages that the real problem is the Eurozone and although Friday's US Job figures triggered the turmoil over the last couple of days, it appears that at long last everyone has woken up and smelt the coffee on the real issue.

"It seems impossible to me for Greece to do anything other than come out of the euro as it is basically bust.

"The other concern I have is the other countries that may be in a similar position - Spain, Portugal and possibly Italy."

He pointed out that in his view the sell-off had left many cheap stocks available.

He said: "Don't forget, good companies do not become bad companies overnight and serious investors should resist panic."