By Simon Miller
The FTSE 100 opened to choppy trading as the euphoria of central bank intervention in the liquidity market faded.
After closing up 3%, the FTSE 100 is currently trading at 5,528.21 at 9.58GMT while bank stocks continued to rise by 3.64% on the back of the intervention.
Yesterday, temporary US dollar liquidity swap arrangements were lowered by 50 basis points amid unsubstantiated rumours that central banks had to intervene to prevent a French bank going bust.
The Banks of Canada, England, Japan, the European Central Bank, the Federal Reserve and the Swiss National Bank agreed co-ordinated action as it became clear that European banks were struggling with their $2trn (£1.3trn) debt rollover.
Ratings agency Fitch said US money markets had slashed funding for French banks by 69% and German banks by 50%. In the last two weeks, European banks have been essentially shut out of the dollar market.
In addition, the Chinese announced that it was easing banks' required reserve ratio in a bid to introduce more liquidity to the system.
However, BNP Paribas chairman Baudouin Prot went on French radio station Europe 1 this morning to ally fears that there could be a credit crisis in France saying there was no sign of such a thing happening in the country.
French bank stocks have been particularly hit over fears about their exposure to European sovereign debt, especially in Italy and new capital rules in Europe.
In October, the European Banking Authority said BNP needed an additional €2.1 billion to meet new capital rules by June 2012.