But CMC Markets trader Jimmy Yates warned: “There’s little to suggest that there will be any real let up in the volatility as we move into next week.”

Martin Slaney, head of spread betting at GFT Global Markets, was equally dubious that the worst was over. He said: “The markets have taken this (Fed) move as a positive step, but this may prove to be a knee-jerk rally."

With the FTSE recovering, the Treasury urged investors to remain calm.

"Markets periodically suffer from periods of uncertainty," said a Treasury spokesperson.

"It is important in considering recent events not to have a knee-jerk response but to look at the underlying reasons and any lessons there might be in a careful and considered manner."

And the Chancellor pointed out that Britain’s economy has enjoyed 60 consecutive quarters of growth and was well placed to withstand the current buffeting.

However, he said there was "certainly an argument" for greater transparency in markets and noted this would be discussed by G7 nations in the coming weeks and months.

Business lobby groups used the US intervention to urge the Bank of England’s against further interest rate hikes and even a potential cut from the current 5.75 per cent if the turmoil continues.

David Kern, economic adviser to the British Chambers of Commerce, said: “While we are not calling for an immediate cut in UK rates, we think it is important the MPC makes it absolutely clear that UK interest rate increases are no longer on the agenda at present, and if global threats worsen they will not hesitate to cut rates as well.”

Edward Bonham Carter, chief executive of Jupiter Asset Management, "The current setback, though unpleasant, does not alter our view that shares continue to be an attractive asset for investors over the medium term. The US economy may be slowing down, but there is no reason to expect it will go into recession. "

He added, "Global economic growth is still strong, equities are trading at modest valuations and companies are in rude health. We would reiterate our view that this setback is a potential buying opportunity for investors prepared to take a medium-term view.”