The FTSE 100 index recovered after falling on early morning trading, slipping 0.6 per cent by 08:45 BST before rallying later in morning trading.
After Asian markets saw two per cent wiped off their value in early trading today, the London Stock Exchange's benchmark index continued its own falls after seeing its lowest closing level since March yesterday.
But, having lost nearly one per cent of its value in early morning, it subsequently recovered to register a net 0.55 per cent gain shortly before 10:00 BST.
European bourses also saw volatility, with the German Dax index down by 0.5 per cent and the French Cac 40 up by 0.37 per cent after earlier falling by half a point.
Earlier, in the Asia-Pacific area, Japan's Nikkei index was down 2.36 per cent while the Hong Kong Hang Seng fell 2.76 per cent. The Singapore STI was down 2.4 per cent.
Analysts say the global falls have been triggered by widespread uncertainty about the impact of tightening credit affordability, which many fear will end the private equity buyout boom and deepen the difficulties currently experienced by the US subprime market.
Eric Weiner, the author of What Goes Up: The Uncensored History of Modern Wall Street, has said a collapse in world stock markets today would be felt very differently from the last crash 20 years ago.
Speaking on the Today programme, he explained that since there are far more individual investors with money in the stock market now a collapse would affect far more people.
"Back in the 1980s we still didn't have that huge movement of individuals moving into the stock market. It still was pretty small in terms of the exposure," he said.
"Now we are talking about the market flat lining, well that's everybody's retirement money, that's everybody's savings.
"When you are talking about pain the pain is going to be spread out and it's going to be felt in ways that are different from the past because many, many more people have direct exposure."