Markets in Europe stabilised on Thursday following a turbulent day on US and Asian stock exchanges, fuelled by investor fear of a global recession.
The FTSE 250, seen as a good gauge of the UK economy, gained 0.18% recovering some of the losses it made the pervious day, when it closed down 1.5%
The slight recovery followed a global sell-off amid concerns over the US-China trade war and the global economy.
Weak data from Germany and grim signs in bond markets spooked investors.
As a result, the three main US stock markets closed 3% lower overnight and European stocks fell across the board, while the Nikkei closed 1.2% lower.
On Thursday, most European markets recovered some of Wednesday’s losses, trading up about 0.1%.
But analyst Neil Wilson from Markets.com said the recovery looked “precarious”.
“Global risks and macro-economic data show no signs of improving,” he said.
Wednesday’s retreat by investors was triggered by tremors in bond markets, which were interpreted as a warning sign of a possible recessions in major economies.
The yield on two-year and 10-year Treasury bonds inverted for the first time since June 2007 as investors dived into the longer-term investments.
This meant investors were willing to get lower returns for holding bonds for a longer period in return for an investment they believed was safer.
Usually investors want higher returns for holding bonds for longer, because of the risks involved.
Historically, such bond movements have been a reliable indicator of possible recessions. For example, they preceded the last big global downturn more than 10 years ago.
The UK bond yield curve also inverted for the first time since 2008, while the yield gap between 10-year and two-year German government bonds was at its tightest since the financial crisis.
But speaking to the BBC’s Today programme, Kathleen Brooks from Minerva Analysis said the sell-off may have had a simpler cause.
“It’s also August,” she said. “People are away, so moves can be exaggerated in August.”