European markets on Thursday recovered some of Wednesday's hefty losses after a relatively steady performance in Asia overnight, with British banking stocks in particular enjoying a strong rally in the wake of the government's $865 billion rescue plan.

European jitters appear to have been calmed by Wednesday's simultaneous interest rate cuts from the world's key central banks, even though lending between financial institutions remains limited.

'European equity markets have bounced back this morning, and in that regard there is some sense of normality returning but money markets remain frozen,' said Neil Mackinnon, chief economist at ECU Group.