World markets cast aside jitters

On Wall Street surging oil prices boosted Exxon Mobil offsetting declines in financial shares triggered by concerns about the housing market.

The Dow Jones index ended a jittery session 0.4% higher while the Nasdaq put on 0.1%.

The market had been down in mid-afternoon after the Federal Reserve slashed its growth forecast for 2008.

The Fed trimmed its prediction to between 1.8% and 2.5% from its June forecast of 2.5% to 2.75%.

Exposure

The strong corporate gains countered losses at firms including home loan group Freddie Mac which was the latest to warn of woe in the mortgage sector, posting a $2bn (£1bn) loss.

Shares fell 27% after it revealed the loss in the three months to 30 September, and said it had needed to set aside $1.2bn to cover bad mortgage debt.

It is one of the two government-sponsored enterprises that lend money to banks to use for mortgages, and it had been thought that its loan book did not have as much exposure to bad debt as some of the commercial banks.

The Dow Jones was up 51.70 points to 13,010.14 while the Nasdaq Index gained 3.43 points to close at 2,596.81.

Analysts said bargain hunters had helped European shares recover from their Monday falls.

In Europe, London's main FTSE 100 index added 1.7%, while Frankfurt's Dax closed 1.6% up and Paris' Cac advanced 1.4%.

'Risk aversion'

Analysts said US investors remained fearful that ever more global banks would reveal their exposure to bad American mortgage debt and the resulting credit crisis.

"The concern is that if there are unknown losses still to be recorded, the risk aversion that has been present in markets will remain," said Tony Brennan, equity strategist at Deutsche Bank.

"It's a Black November," said Masayoshi Okamoto, head of dealing at Japan's Jujiya Securities.

Tokyo's Nikkei 225 closed up 1.1% on Tuesday after sentiment was buoyed by a takeover bid for one of the country's largest banks.

A group of investors led by US buyout firm JC Flowers are bidding about $1.8bn for just under a third of Shinsei Bank.