European markets have steadied after Thursday’s dramatic falls, which were prompted by grim economic and health news from the US.

In the early trading, London’s FTSE 100 was flat at 6,7403, while German and French markets were up about 0.5%.

However, markets remain volatile as investors struggle to assess the economic damage of coronavirus.

On Thursday, US shares slumped by 7% and UK and other European markets ended with losses of about 4%.

The sell-off was prompted by a bleak view of the US economy by its central bank, the Federal Reserve, and reports of rising coronavirus cases from some US states.

Asian markets reflected the downbeat trend overnight but were far less affected.

Japan’s Nikkei ended down 0.75% at 22,305, while Hong Kong’s Hang Seng fell about 1% to 24,201 points.

The falls followed a weeks-long rally that had helped shares recover some ground from the lows seen in March.

Slow recovery

The gains followed hopes that the global economy would rebound as authorities loosened restrictions put in place to try to slow the spread of the virus.

Last week’s surprise report showing US employers had restarted hiring in May helped to push the tech-heavy Nasdaq index to new highs.

But the recovery remains tentative. On Thursday, the US Labor Department reported that another 1.5 million people had filed new unemployment claims last week. More than 30 million continue to collect the benefits, it said.

US Federal Reserve policymakers said on Wednesday that the unemployment rate could remain above 9% at the end of the year – close to the worst level of the financial crisis,

Several US states that have moved to reopen, including Arizona and South Carolina, have seen an uptick in Covid-19 cases in recent days.