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Volatility sweeps global markets

European shares steadied on Friday after sharp falls in world stock markets which were prompted by worries over higher interest rate levels.
In London, the FTSE 100 rebounded into positive territory, easing fears that the share slump would be extended.
World markets plunged on Thursday, hit by concerns that higher interest rates will hit profits and takeover deals.
UK shares fell 3.2% on Thursday - the biggest one-day percentage loss since 2002, and US stocks were down 2.3%.
The stock market as a whole may be set for some dismal days
Robert PestonBBC Business Editor
Read Robert's blog
Analysts had predicted a further dip when UK trading resumed, but said that because most of the year's gains had been wiped out in one day, the market was now undervalued.
Worrying conditions
On Friday, the FTSE 100 was trading up 47.7 points, 0.76% at 6,300 by 1010 BST, after an initial fall of 0.9%.
France's Cac-40 index of leading shares was up 0.2%, while Germany's Dax share index was down 0.6%.
In Asia, the Wall Street slump on Thursday led to Japan's Nikkei average closing down 418.28 points, or 2.4%, at 17,283.81, while Hong Kong's index ended 2.7% lower.
This followed New York's Dow Jones Industrial Average closing down 311.5 points, or 2.3%, at 13,473.57.
Analysts and investors have been warning that a number of factors are combining to create worrying conditions for the world economy.
Rising interest rates have also meant that the age of cheap cash has come to an end, with central banks worldwide, including the Bank of England, raising their rates to slow stubbornly high inflation.
At the same time, oil prices have climbed, raising fears that inflation could also pick up again because of higher energy costs.
Credit crunch
A tightening of availability of credit is behind much of the market uncertainty, observers say.
The rise in share prices in the past year has been largely driven by the takeover boom, with private equity bidders pushing up the value of the firms they are targeting.
People are concerned about what might happen rather than what is happening
Robert Parkes, UK equity strategist at HSBC
Most of these deals are paid for with borrowed money and the banks who have loaned this cash have been laying off a large proportion of the loans by selling them to other investors.
However because investors are bruised by their losses in the US sub-prime mortgage market, they are now less keen now on buying the risky loans from the banks, taking away the credit needed for takeovers and prompting share prices to fall.
Within the stock markets, bonds have rallied, with investors looking for assets that could guarantee them steady, and relatively safe returns.
"You have a classic flight-to-quality rally," said Dean Junkans of Wells Fargo Private Bank, adding that markets outside of bonds were "finally appreciating risk".
There are also fear that a rise in defaults on US sub-prime mortgages may lead to a wider problem, said Robert Parkes, UK equity strategist at HSBC.
"People are concerned about what might happen rather than what is happening."

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