Traders invest in safe haven assets as market rebounds

London's top shares index today clawed back some of the losses suffered in yesterday's bloodbath as traders took advantage of beaten-down prices.

The FTSE 100 Index was around 1% higher following the previous day's 3.6% plunge, which wiped some £49 billion from the value of top flight stocks.

A cocktail of recession, banking and eurozone debt fears saw traders flee from riskier stocks and plough into safe haven assets such as gold and the US dollar.

But the banking sector, which took a hammering in the wake of a US subprime mortgage-related lawsuit, managed to recover some losses, with Lloyds Banking Group and Royal Bank of Scotland both ahead 3%.

The market was also supported by a strong showing from the heavily-weighted mining sector, which was heavily sold off in the last two days of trading.

A jump in gold prices also helped the sector, after the precious metal hit a new record above 1,920 US dollars an ounce earlier in the session.

Vedanta Resources increased 3%, Kazakhmys added 2% and Xstrata advanced 2%.

Elsewhere, Costa owner Whitbread shot to the top of the risers' board after a strong trading update showed the coffee vendor increased like-for-like sales by more than 6% in the first half of the year.

A day of volatile trading is expected as economic data from both sides of the Atlantic are released.
Traders were digesting the second estimate of eurozone economic growth, which came in at 0.2%, as well as the US's Institute of Supply Management's non-manufacturing index.

Yesterday, taxpayer-backed Royal Bank of Scotland fell more than 12% after it was singled out by a broker as the most vulnerable British target of claims made by the US Federal Housing Finance Agency (FHFA) over the subprime mortgage scandal.

Barclays and HSBC, who joined RBS on the list of 17 banks, fell 6% and 3% respectively, while Lloyds Banking Group, damaged by weakened sentiment, fell 6%.

The losses were compounded as borrowing costs for Italy and Spain began to creep up again, signalling weakening confidence in the countries' finances.

The rebound enjoyed in London was also felt elsewhere in Europe as Germany's Dax added 1% and the Cac-40 in France was up 0.8%.