Update: FTSE recovers as European debt whipsaws

Equity markets have begun to recover after an early slump driven by a plunge in German sovereign debt prices.

The UK's blue chip index dropped as much as 1.7% this morning, with just four stocks - RSA, Carnival, easyJet, and Pearson - in the black. This afternoon, however, the FTSE had erased much of this loss to stand 0.6% lower at 6,891, reflecting a recovery for bund prices. Earlier, 10-year German bund yields rose by almost 20 basis points to 0.79%, having been as low as 0.05% last month, and Spanish yields rose above 2% for the first time since November. However, volatile trading saw bund yields move back down to 0.63% shortly after 13:00 BST. Pan-European indices dropped 0.3%, to ...