World stock markets continued their recovery yesterday as investors piled back into the markets searching for bargains.

A sense of calm returned to the markets as investors appeared less concerned about the possible impeachment of President Clinton. The markets also took some solace from tentative signs that world leaders are starting to address market turbulence at a global level.

The Group of Seven (G7) said it would decide within two weeks whether to hold an emergency summit to discuss market turmoil. Japan and China also launched a high-level dialogue on the regional crisis. But while the markets appeared more convinced that Mr Clinton's future was assured, Mr Jim Power, chief economist at Bank of Ireland, said this might not be a lasting factor. The markets sell-off, he added, had little to do with Mr Clinton's problems and the other underlying causes in Russia, Asia, Latin America and Japan are still there.

"In Brazil the currency is still under serious pressure and the Mexican peso is still close to its all-time lows reached last Friday. That is bad news for global economic activity."

But yesterday most stock markets saw a recovery. Wall Street closed 1.92 per cent higher at 7945.35, a gain of 149.85 points, while Latin American stock markets followed its lead. Most were up between 1.5 and 2.7 per cent.

London's FTSE 100 index leading stocks ended 2.93 per cent up, gaining 150 points to close at 5,268.6 points. In Dublin, the ISEQ closed up 1.73 per cent at 4,072. European markets also gained across the board. In Frankfurt, the DAX index rose 3.36 per cent to 4,896.49 points.

In Asia Japanese shares rallied 2.2 per cent, Hong Kong rose 1.1 per cent and Sydney gained 1.7 per cent.