Bank of England governor Sir Eddie George has moved to damp down city jitters after another day of turbulent stock markets.

George played down fears of recession and said that the world economic slowdown is "showing signs of levelling off".

"There is not a lot in the data to show the economy picking up," he said.

His intervention came as stock markets "stepped back from the brink" after a turbulent day on the world's exchanges.

In London during the morning the FTSE 100 plunged to below 5000 for the first time since 1998 but later picked up.