DON'T be lulled into a feeling of false security by yesterday's rally on the London stockmarket.

Few commentators believe the improvement is the start of an upward trend, merely a brief respite in which investors can count their losses and prepare for more days and weeks of turbulence.

Last night the FTSE 100 index of leading shares stood at 4471.2, up 78.6 points on Wednesday's close, the lowest for more than five years.

In the absence of any meaningful corporate news, yesterday's rally was prompted by bargain-hunters hoping to snap up shares cheaply. With the US enjoying Independence Day celebrations there was no lead to take from across the Atlantic.

There will be an anxious wait in London today to see how the New York market performs when it opens this afternoon.

The only bright spot yesterday was the Bank of England's decision to hold interest rates. An increase would have made equities an even less attractive investment, and sent share prices tumbling even further.

While analysts point to the long-term prospects for shares, they cannot hide the fact that the markets are back to where they were in 1997. It will take some considerable time for them to get back to the peak they reached in 1999.

As yet there is no sign of recovery. Until confidence in the global economy returns, recovery is a forlorn hope. With the Middle East in turmoil, and accounting scandals rocking the US economy, there is a distinct lack of confidence.

This is not just bad news for those of us with shares, but also those of us with endowments and savings packages linked to the health of the stockmarkets.

Alex Scott, equities analyst at Seven Investment Management, said: "The sentiment is dominated by fear and caution at the moment. Until investors can rebuild trust there is going to be little to move the headline indices."

Small investors are being urged not to panic after Wednesday's plunge, which wiped £37bn off the value of UK shares. The falls in share prices, which have knocked £165bn off the value of the UK's biggest companies since the start of June, have wiped about £42bn off the value of pension funds, which hold about £300bn in UK equities.

Sue Concannon, managing director of Halifax Share Dealing, also advises people to sit tight, saying: "Over any ten-year period stockmarket investments have outperformed just about any other investment."

Nevertheless, the current market falls are likely to heap further misery on consumers with endowment mortgages, many of whom are already facing shortfalls.