Markets shrug off US losses

European markets bounced higher in opening deals after recent falls as global leaders have tried to downplay the policy differences between US and Europe ahead of this weekend's G20 meeting in Canada.

The FTSE 100 added 12.1 points at 5112 points as banks made strong gains after clear signs global regulation will be much less draconian than feared. 

In the US, the DJIA finished the day down 1.41% at 10152 after cautious comment from the FOMC on Wednesday evening and amid more downbeat updates from retailers adding to fears consumers in the world's largest economy are tightening their belts now stimulus is being withdrawn.

The row between the US and European governments about whether more stimulus is needed and how much damage government spending cut could cause to the global recovery looks set to continue but for now the world’s leaders are focussed on what they agree on at the meeting.

Still to come, investors will watch the final estimate of US GDP growth figures for the first quarter and the final reading of the June University of Michigan consumer sentiment index, later today.

On the company front, banks were leading the risers as the Basel Committee on Banking Supervision seems to have bowed to lobbying from the banks and countries such as Canada where banks played no role in the financial crisis and will water down its proposals on how much money banks need to keep.

There was also some positive news from the US which also looks ready to soften its proposals.

That comes just days after chancellor George Osborne announced a bank levy here that was lower than feared and which was offset by lower corporate tax.

Elsewhere, the Bank of England outlined the key risks to Britain's financial system in its half-yearly Financial Stability Report.

The Bank of England warned there remain risks to stability especially from the high levels of government debt in Europe but also said banks have reduced their reliance on wholesale funding. An overreliance on wholesale funding contributed to the collapse of Northern Rock.

Bruce Packard banking analyst at Seymour Pierce said: 'Just 15% of customer loans are now funded through the wholesale markets, a level not seen since 2003.'

Standard Chartered shares rose 2.98% to £17.61, RBS shares added 2.32% to 46.24p and HSBC shares were up 1.88% at 649p.