Share prices were on a knife-edge yesterday as hopes that central banks had succeeded in stabilising markets battled with fears that the credit crisis is far from over. The Times. The Guardian. Financial Times

A €40bn (£27bn) injection from by the European Central Bank to assist banks hit by US subprime woes, and the Bank of Japan’s decision to keep interest rates on hold, brought an early boost to Britain’s stock market.

However, early gains on the FTSE 100 were wiped away after shares tumbled on Wall Street as Countrywide, the biggest US mortgage lender, warned of a housing-led recession in America. The index closed up just 0.025, at 6,196.90, its weakest performance in a week.

Around 146 banks bid for the ECB’s €40bn injection of three-month funds to the interbank money market, and the funds helped the pan-European FTSEurofirst 300 index to rise 0.5%, its fifth consecutive day of gains.

The US Federal Reserve followed suit, adding $17.25bn (£8.6bn) into the financial system.

Investors are nursing heavy losses from the financial crisis of the past three weeks, but the question is whether there will be a domino effect on the wider economy. This is unlikely to be known until the banks release their third-quarter results.