Gloom lifts from stunned markets

There were signs in European trading that the world's financial markets were beginning to stabilise as shares, and the dollar, recovered some lost ground.

On the commodity markets, oil and gold prices slipped back after big rises immediately after Tuesday's terrorist attacks.

Prices of oil, gold and bonds, which surged after the strikes as money switched to assets considered "safe havens", fell back in trade on Wednesday.

Stock markets at close of trade, Wednesday

Frankfurt: Dax, up 1.4%

London: FTSE 100, up 2.9%

Paris: Cac 40, up 1.3%

Tokyo: Nikkei 225, down 6.6%

Hong Kong: Hang Seng, down 10%

Seoul: Kospi, down 12%

Wall Street closed

And, after a day of highly volatile trading, European shares ended, overall, in positive territory.

London-listed stocks recovered almost half of the losses sustained on Tuesday, when the main stock index reported its sharpest drop in 14 years.

Weak volumes

Volume remained weak, however, and institutions warned it was too early to make an accurate assessment of the economic, and human, costs of the US attacks.

US markets, many of which were physically based in the Trade Center towers destroyed by the strikes, remained closed on Wednesday and will now reopen on Friday at the earliest.

Not since World War II is Wall Street believed to have stayed closed for two days running.

Bank support

European shares had opened sharply weaker on Wednesday, following losses on Asian markets.

But stock prices rebounded amid hopes that central banks in the US and Europe may cut interest rates to help revive economic confidence.

Sentiment was also supported by pledges by major central banks, including the European Central Bank and the US Federal Reserve, that they will provide sufficient "liquidity" to keep the world economy going.

The banks hope that this will provide companies and governments with enough cheap credit to keep functioning and investing, so helping to stave off the threat of global recession.

"There are many financial companies who may have experienced difficulties as a consequence of events in America and the central banks are pledged to bail out many of the clearing commercial banks," Jeremy Batstone of NatWest stockbrokers told the BBC's World Business Report.

The talk also helped revive the dollar, which fell steeply following Tuesday's terrorist strikes.

In late afternoon dealing in London on Wednesday, one euro was worth $0.9062, compared with $0.9149 in morning trade.

Gold falls back

The prices of bonds, oil and gold, which surged on Tuesday, fell back amid a sense of returning calm.

"What can you say? This is a terrible thing to happen but the market must retain some semblance of order," said Rhona O'Connell, market analysis manager at the World Gold Council.

Although US exchanges remained closed, senior financial figures stressed the need to maintain trading on markets elsewhere.

"It may be difficult - one's heart may not be in it - but the fact of the matter is that financial markets are open globally 24 hours a day and they have to continue as best as possible," Mr Batstone said.

London and Irish stock exchanges at 1245 GMT held an minute's silence in honour of the victims of Tuesday's terrorist attacks.

Asian fallout

Earlier, Asian stock markets had closed sharply lower.

In Tokyo, where authorities cut in half the limits on daily price movements, the Nikkei index fell 6.6% to fresh 17-year lows.

The index closed at 9,610 points, falling below the psychologically important 10,000 points mark for the first time since 1984.

In Hong Kong, the main share index dived by more than 10% before recovering slightly.

Trading was also delayed in Korea - by three hours - and promptly suspended when the benchmark index fell 12.2%.

China's normally well-insulated Shanghai B share market opened 6.3% lower, while in Singapore the Straits Times index was down 8.6%.

Investors followed the trend set in European markets on Tuesday, with money moving from shares into the safe havens of bonds and commodities, chiefly oil and gold.