"I think we are heading for a market shock in September or October that will match anything we have ever seen before," said a senior credit banker at a major European bank.

Despite this, bank shares rebounded on Wednesday, showing the growing disconnect between equity and credit investors. RBS closed up 9pc at 21.87p, while Barclays put on 3pc to 149.6p despite credit default swaps on the bank hitting a 12-month high. This mirrored the US trend, with Bank of America shares up 10pc in late Wall Street trade after a hitting a 12-month low on Tuesday over fears that it might have to raise as much as $200bn (£121bn). As with the European banks, the rebound in the share price was not reflected in the credit markets, where its CDS reached a 12-month high of 384.42 basis points.

European stock markets joined in the rally. The FTSE closed up 1.5pc at 5,206 on hopes the chance of a global recession had diminished. European shares hit a one-week high, with Germany's DAX closing up 2.7pc and France's CAC 1.8pc higher. The Dow Jones index edged higher on strong durable goods orders data as markets began to accept that the US Federal Reserve is unlikely to signal fresh stimulus at Jackson Hole this Friday.

Even Moody's decision to downgrade Japan's sovereign credit rating by one notch to Aa3 did little to damage global sentiment, although Tokyo's Nikkei closed down just over 1pc.

As stock market nerves settled, gold - which has recorded steady gains recently as investors seek a safe haven - fell 5.3pc to $1,777 in London.