London stock market rallies after slump, recovery in Germany

London, Oct 7 (DPA) Trading on the London Stock Exchange recovered after Monday's slump as the Financial Times Index was up by more than 2.5 percent in early trading, reports said.

The FTSE 100 Index rose by 2.6 percent, or 122 points, to 4,711.48 during the first hour of trading, following Monday's dramatic 8-percent slump which represented the largest one-day percentage decline since 1987.

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However, shares in the Royal Bank of Scotland (RBS) were down by 20 percent, adding to a dramatic cut in early FTSE gains and underlining the continuing volatility of the market, analysts said.

They said clarification of Germany's position on backing for private deposits, Tuesday's meeting of European Union (EU) finance ministers and the expectation of a British aid package for banks were all contributing to a stock market recovery.

German stocks recovered some of their losses in early trading in Frankfurt Tuesday.

The blue chip DAX climbed 1.63 per cent to 5,475 after losing 7.07 per cent Monday.

Among the winners was troubled property lender Hypo Real Estate (HRE), which is subject of a 50-billion-euro ($68 billion) bail-out after running into liquidity problems.

HRE saw its shares rise 14.3 percent to 5.35 euros. On Monday, the bank group saw its share price slashed by 37.42 percent.

Deutsche Bank, Germany's biggest, was down 3.3 cent at 46.26 euros, showing that financial institutes were still not out of the woods, analysts said.

Another early loser was software giant SAP, whose share price dropped 1.1 percent to 28.54 euros after the company issued a profit warning Monday.

'The mood remains cautious,' one trader said.