World stocks were at near three-year lows today but fears of a major market meltdown failed to carry through from Wall Street to Europe as confidence in bank rescue packages persisted.
The US Congress's rejection of a bank rescue plan tore nearly 9 per cent off the broad S&P 500 last night day but European shares and many Asian stock markets clawed back from early losses on hopes the US plan would eventually go through.
US stock index futures also pointed to a higher opening, suggesting belief that Monday's selloff was over-done.
"It's certainly my working assumption that there (will be) some sort of agreement reached in the US and based on that I would expect the market to recover quite strongly from yesterday's sell-off," said Darren Winder, equity strategist at Cazenove.
Angst over the battered financial sector continued, nonetheless, with Belgian-French financial services group Dexia getting a €6.4 billion ($9.18 billion) capital boost from public shareholders to help it fight the global credit crisis.
Ireland also offered to guarantee all bank deposits for two years to improve banks' access to funds on international markets. It also guarantees covered bonds, senior debt and dated subordinated debt.
Money markets remained on life support with benchmark rates continuing to climb, albeit distorted by the final day of the third quarter.
European stocks fell as much as 2 per cent in early trading and Japan's Nikkei closed 4.12 per cent lower after the deep losses on Wall Street in the wake of Congress's failure to agree a $700 billion plan to buy up toxic debt from the financial industry.
Globally, MSCI's main world stock index, a benchmark for many leading investors, was down 0.7 per cent, adding to a 6.84 per cent loss yesterday that saw the index's market capitalisation plunge $1.73 trillion.
But the FTSEurofirst 300 index of top European shares recovered to gain 0.6 per cent.
"No one really expected a no vote (in Washington), but it's encouraging that they're clearly going to vote on this again," said one equities trader in Europe.
Earlier, the Nikkei average hit a three-year closing low, shedding 483.75 points to 11,259.86, the lowest finish since June 2005. It earlier lost nearly 5 per cent.
Other Asian stocks recovered, however. Hong Kong's Hang Seng index closed 0.8 per cent higher, while South Korea's KOSPI pared losses to end down 0.6 per cent. Both had fallen more than 5 per cent early in the day.
Reuters