STERLING and gilts recouped early massive losses yesterday, after initial jitters about the inconclusive outcome to Britain’s election eased on prospects of a deal between the Conservatives and Liberal Democrats.

Jan Strupczewski, Reuters

The short-end of the European government bonds market soared as US Federal Reserve chairman Alan Greenspan signalled rates will stay low for as long as needed, analysts said.

The dollar eased versus major currencies in mid-afternoon London trade after a smaller than expected rise in US industrial output in November, dealers said.

European government bonds slid in late London trade as investors decided to take their profits amid a better performance on stocks, dealers said.