FTSE 100 bounces back but US markets stumble again

A rally in banking stocks helped the FTSE 100 recover sharply on Monday but US markets later went into another steep reverse.

London's top-flight share index gained as much as 2% at one stage but closed 1.25% higher at 7026 points - recovering some of the ground lost in a heavy sell-off last week.

HSBC, the index's second biggest company, rose almost 5% after it reported a better than expected increase in quarterly profits and brushed off immediate concerns about Brexit and US-China trade tension.

The FTSE's gains were in line with those on the continent though US shares erased early gains - with the tech-dominated Nasdaq (Frankfurt: 813516 - news) trading at levels last seen in April - closing 1.6% down.

Tech shares - such as Amazon and Netflix (Swiss: NFLX-USD.SW - news) - were worst hit as investors fretted over mixed earnings in the current reporting season.

The performance left Asia and Europe, which have tended to follow New York's lead in the recent volatility, facing a nervous opening on Tuesday.

The FTSE 100 remains on course for a dire month having ended September at above 7,500, with investors and analysts pessimistic about company results.

Monday's rally saw a notable upturn for financial stocks, led by HSBC, with rises of more than 3% for Barclays (LSE: BARC.L - news) , Royal Bank of Scotland (LSE: RBS.L - news) , Standard Chartered (BSE: 580001.BO - news) and Prudential (SES: K6S.SI - news) .

London's positive performance was part of a wider share surge across Europe, with car makers lifted by reports that China was considering halving the tax on car purchases.

There was also relief after ratings agency Standard & Poors decided not to downgrade its credit rating for Italian debt, lifting banking stocks in the country whose populist government is facing a budget showdown with the EU.

The rises came despite a slump of more than 3% overnight in China's main stock index as figures showing an extended slowdown in profit growth among industrial firms added to concerns about a cooling economy.

Edward Park, investment director at Brooks Macdonald (LSE: BRK.L - news) , said: "With (Other OTC: WWTH - news) the volatility of the last week or so, today's stronger open to markets should not be seen as a sea change but more a pause for breath."

Worries about Italy and the US-China trade war, as well as disappointing results from tech giants Amazon and Alphabet (Swiss: GOOGL-USD.SW - news) - the owner of Google - have been weighing on investor sentiment.