Stock markets around the world have staged a strong recovery following the heavy falls on Thursday, boosted by strong gains on the hard-pressed Russian market, a strong defence of the rouble by President Yeltsin and a massive 8 per cent overnight recovery in Hong Kong.

But dealers are not convinced about a long-term rally in Russia and some said that yesterday's oil-led turnaround could actually have been motivated by investors snapping up export-oriented stocks, which would likely outperform the market in the case of a rouble devaluation.

There are also lingering suspicions in some sections of the market that a weekend devaluation is a possibility, despite the insistence by President Yeltsin and the Russian central bank that the value of the currency will be maintained.

Meanwhile, the Hong Kong market rebounded overnight by 8.5 per cent as the territory's monetary authority went on the attack against speculators with a buying spree in both the stock and currency markets. Hong Kong Finance Secretary Mr Donald Tsang accused speculators of attacking the Hong Kong dollar, forcing interest rates up and stock prices down, then cashing out their short positions in forward markets.

"We do not tolerate attempts by speculators to manipulate our interest rates by engineering extreme conditions in the money market so that they can benefit from the short positions they have built up in Hang Seng Index futures," he said.

Hong Kong's rebound, combined with a rise in the yen against the US dollar, sparked rallies in most other big Asian markets with the notable exception of the Tokyo market.

Russian stocks bounced back by a remarkable 14 per cent after a black week of panic-stricken trading with the oil sector, pulling the market out of the abyss. However traders remained sceptical that a rally was round the corner.

Trading was briefly suspended for the third time this week, only this time because of sharp gains rather than losses, as equities wiped out half the losses recorded in what had been a wretched week for Russia's financial markets.

President Yeltsin said that he would defend his currency and that his government had the situation under control. "There will be no devaluation," the Kremlin chief said, responding to the comments from financier Mr George Soros that a 1520 per cent devaluation is a first step towards sorting out Russia's financial mess.

The rouble has edged downwards against the dollar in recent weeks despite desperate defence of the currency by a central bank whose reserves have dwindled from $19.2 billion three weeks ago to $17 billion at the end of last week.

The Russian market got an early fillip from comments by a White House spokesman, Mr Mike McCurry, who said the international community and G7 in particular had not given up on Russia yet. "The international community has a big stake in seeing that Russia gets their economy moving in the right direction," Mr McCurry said. Later, it emerged that President Clinton, who is due to visit Russia in early September, had an hour-long phone conversation with President Yeltsin, although no details of the discussions were revealed.

The better tone in Russia and the Far East gave European markets a boost and there were gains of around 1 per cent on most major markets. Frankfurt closed up 1.7 per cent although local investors are still cautious and believe that yesterday's recovery is fragile. In London, the FTSE closed just over 1 per cent higher, although the Irish market failed to benefit from the improved tone and closed marginally lower on the day.

On Wall Street, the market opened with a 100-point jump but soon ran out out steam. At the close, the Dow was 8,425.0, down 34.5 points.