Jittery start for stock markets

Stock markets around the world are still struggling to find their balance, following yesterday's steep losses on Wall Street.

Most of Asia's markets managed to shrug off the bad news, with Tokyo's Nikkei index gaining 1.85% and South Korea's stock market climbing 3.45%.

However, rumours surrounding possible US retaliation against Afghanistan spooked Hong Kong and Singapore, where market indexes did slide into the red.

In Europe, meanwhile, the markets had a difficult start, with all major markets dropping nearly 2%.

On Monday, the first day of trading in the US since the attacks on the World Trade Center and the Pentagon, stock markets had plunged. The benchmark Dow Jones index lost 7.1%, suffering its largest one-day points fall in history, while the Nasdaq tech stocks index fell 6.8%.

However, this was better than expected. Many analysts had feared US markets could fall as much as 10%.

As Wall Street reopened on Monday, central banks came to the US markets' aid, slashing interest rates faster and further than predicted in a concerted bid to stave off financial panic.

The US Federal Reserve led the way, cutting by half a percent, followed by the European Central Bank and the central banks of Switzerland, Canada and Sweden.

Central banks that have yet to ease monetary policy are coming under increasing pressure to do so, with economists widely expecting a rate cut from the Bank of England as soon as Tuesday.

Julie Collins-Thompson, an economist at BNP Paribas said: "With (half point) rate cuts from the Fed and the ECB... it seems very unlikely that the BoE will wait until their meeting on October 4 but instead move in tandem".

Speculation that the Bank of Japan would take action on Tuesday was heightened by the bank's decision to shorten its meeting to one day from the usual two.

Japan's economics minister Heizo Taneka has said the goverment will present the Bank of Japan with a list of stimulus measures it wants implemented.

Analysts are anticipating a wave of rate cuts in the region as other Asian central banks catch up with the Fed's move.

The falls on Wall Street, though sharp, were less drastic than predicted, and the London, Frankfurt and Paris stock markets all closed higher.

In Tokyo on Tuesday morning, the Nikkei index was up 3.22% or 306.08 points, at 9810.49 at 0350 GMT, reversing the previous day's trend.

"The extent of the fall on Wall Street was in line with expectations," said Yuji Nakamura, chief strategist at Shinko Asset Management in Tokyo.

Hong Kong's Hang Seng index rose 2.59%, or 243.48, to 9562.83.

Trading also got off to a positive start in Singapore, Australia, South Korea, China and Thailand.

The dollar has steadied somewhat against the yen and the euro, trading at 117.81 yen and 92.39 euro at 0115 GMT.

The falls on Wall Street came after heavy losses on international markets over the last few days, and reflected unease over US economic prospects, and the impact of the attacks on certain key industrial sectors.