European stock markets recovered much of their steep early losses, helped by speculators looking for bargains after sharp drops in earlier Asia trading, although sentiment in financial markets remains fragile on fears of a global recession.
European stock markets recovered much of their steep early losses, helped by speculators looking for bargains after sharp drops in earlier Asia trading, although sentiment in financial markets remains fragile on fears of a global recession.
Traders said many investors feared that further possible co-ordinated action to calm markets will not be enough to fend off a global slump.
The Federal Reserve is expected to shave at least a half of a percentage point off US rates this week and speculation is growing in trading rooms that other central banks will do the same. The Fed's policy making panel meets today and tomorrow in Washington.
European Central Bank president Jean-Claude Trichet said a cut in interest rates next week is "a possibility".
Trichet said such a reduction is an option for the central bank because of a fall in inflationary pressure, due among other things to lower prices for commodities like oil. The ECB has joined the Fed and other central banks in cutting its key rate a half-point on October 8 to combat the worst financial crisis since the Great Depression of the 1930s.
On a visit to Spain, Trichet, said a rate cut from the current 3.75% in November "is not a certainty. It is a possibility".
Germany's benchmark DAX index managed to swing into positive territory, closing 38.97 points higher at 4334.64 after being down almost 5% in early trading. The rally was helped by a massive 147% jump in Volkswagen stock after Porsche said it plans to lift its stake in the car company to 75% by 2009.
France's CAC-40 fell by 126.44 to 3067.35. Motor vehicle stocks were down sharply there on expectations that the car and truck industry will be particularly hard-hit by a global recession. Swiss and Spanish equities ended sharply lower.
Financials were mostly cheaper with Standard Chartered skidding more than 10% and HSBC retreating by 4.7% because of their exposure to weakening Asian economies.
Swedish bank stocks plunged after Swedbank and investment bank Carnegie announced emergency plans to counter the turmoil on financial markets.
Swedbank - one of Sweden's four largest banks - said it would raise SwKr12.4bn (£1bn) in a new share issue, while Carnegie said it received a SwKr1bn loan from Sweden's central bank to boost its liquidity. Carnegie also said it would evaluate its "strategic alternatives," including a possible sale.
Investors are selling emerging market stocks, currencies and bonds. Emerging market equities tumbled as the global financial crisis continued to reverberate through developing economies and Ukraine became the latest country to receive help from the International Monetary Fund.
Equity indices in India, China and the Philippines tumbled more than 6%, while Indonesia's rupiah fell 4.4% against the dollar, leading developing nations' currencies lower. Hungary's BUX Index slid 11% after the IMF said it will lend Ukraine $16.5bn (£10.7bn) and give Hungary "a substantial financing package" as the turmoil in global credit markets and recession concerns sweep across eastern Europe.
Ukraine was the first nation in eastern Europe to receive IMF help in the crisis. Details of Hungary's agreement will be announced in the coming days. Belarus last week asked the IMF for at least $2bn after its banks lost access to financing.
The Bank of Korea cut interest rates by a record as the nation faces its biggest crisis since requiring an IMF bailout a decade ago.
Japan's key stock index plunged more than 6% to its lowest close in more than 25 years as investors grew increasingly gloomy about the outlook for the world's second-biggest economy. In Hong Kong, the blue-chip Hang Seng Index tumbled 12.7% to its worst close since May 2004.
