The stock exchanges in both London and New York staged a modest recoveries today after four days of heavy losses on hopes of action tonight to boost the US economy.
The FTSE 100 Index gained 95.9 points to 5164.9 after a strong start on Wall Street, although the mood throughout the day remained tense and nervous.
Sterling dropped to 1.139 as the euro rallied, while the pound also fell back against the dollar to 1.62.
The Dow Jones Industrial Index, which will close later tonight, has jumped by nearly 200 points on hopes of more stimulus measures by the US Federal Reserve at a meeting tonight, while the appearance of bargain hunters ensured US bank shares recovered after a huge sell-off yesterday.
The better US mood, following a 635 points slump yesterday during Wall Street's worst session since December 2008, helped London overturn an early fall of 5%.
At one point the FTSE 100 Index slid to 4791 before the market pulled back from the brink. It was the first time in more than a year that the top flight index has traded below the 5,000 barrier, on top of the worst run in its history after four consecutive sessions of triple digit losses.
Banking shares were mixed after early falls as investors fretted about their exposure to indebted European economies and after heavy losses for counterparts in New York last night as global recession fears intensified.
British taxpayer-backed Royal Bank of Scotland was among the FTSE 100 Index's biggest fallers, down by 1p at 26.2p. It has lost a third of its value in the past two weeks and is about half the UK government's break-even point of 51p.
Barclays and HSBC added 3.9p and 7.2p at 179.3p and 545p respectively, while Lloyds Banking Group fell 2% or 0.7p at 32.1p.
Oil prices, which are often seen as an indicator of optimism in the global economy, rose late after Brent crude had at one point slipped below US$100 per barrel - a level not seen since February. Shares in BP rose 2.2p to 405.3p, while Royal Dutch Shell added 49p to 1939p.
In corporate news, shares in bakery chain Greggs slumped after it reported a rise in underlying half-year profits but said the second half of the year was likely to be tough. The stock fell 27.5p to 454.5p.
Meanwhile, shares in InterContinental Hotels were among the most resilient in the top flight after the Holiday Inn operator reported a 23% rise in profits.
It also said it intends to increase its UK estate by a further 28 hotels from the current total of 269. IHG added 79p to 1042p.
The biggest Footsie risers were Johnson Matthey up 137p at 1806p, InterContinental Hotels ahead 79p at 1042p, Cairn Energy up 23.2p at 307.6p and Weir Group 123p better at 1703p.
The biggest Footsie fallers were Fresnillo down 131p at 1673p, Royal Bank of Scotland off 1p at 26.2p, Scottish and Southern down 34p at 1203p and Lloyds Banking off 0.7p at 32.1p.