European equity markets rallied sharply this week, helped by bargain-hunting and improved risk appetite.

The FTSE Eurofirst 300 rose 2.8 per cent to 928.81 on Friday, bringing its gains for the week to 11.9 per cent. But October saw the index tumble 12.8 per cent, its steepest loss since September 2002, exposing the extent to which investor confidence has been savaged by a month of economic turmoil.