Share prices in London and New York rebounded yesterday after Wall Street�s worst day of carnage in 20 years, as investors piled into cheap equities, optimistic that Congress will eventually pass a plan to rescue distressed banking assets.

Share prices in London and New York rebounded yesterday after Wall Street's worst day of carnage in 20 years, as investors piled into cheap equities, optimistic that Congress will eventually pass a plan to rescue distressed banking assets, A report that showed a stronger-than-expected reading in a gauge of US consumer confidence also boosted sentiment among traders on both sides of the Atlantic although demand for US Treasury bills as a safe haven investment remained strong.

Most stock markets on mainland Europe also closed higher even though investors remained worried over the health of the financial sector after Dexia became the second Belgian-based bank to be rescued by a bail-out package this week.

The rise in stocks did not come as a complete surprise because heavy falls on Wall Street and other bourses often attract bargain hunters, though questions remain about how investors will proceed. Without a bail-out plan in place to absorb soured mortgage debt and other bad loans from banks' balance sheets, investors are wondering what might restore confidence in lending.

Oil jumped by about $2 a barrel toward $98 after posting nearly a 10% drop the previous session as investors were less fearful of a major meltdown in capital markets.

The dollar gained against the pound, euro and a basket of other current while gold fell to $884.50 a troy ounce, down from $905.00 late Monday.

Talk that US congressional leaders may reach some kind of agreement by the end of the week and speculation that central banks could cut interest rates lured speculators back into markets.

Wall Street and other equity markets notched up hefty losses on Monday after the House of Representatives, in a surprise move, rejected a $700bn rescue package for the troubled US financial sector.

However, President George W Bush said the legislative process on the bail-out plan was not over and the economy depended on "decisive action" from the government.

In the City, the UK market's FTSE-100 index closed 83.7 points stronger at 4902.5, recovering from a 230-point deficit on Monday. Banks helped lift the Footsie, with HSBC up 4.2% and Standard Chartered jumping 8%.

The major corporate news of the session came from Tesco, which rose nearly 5% after it reported a 10% rise in half-year profits and said it was making inroads in the battle against discount rivals.

In New York, the Dow Jones industrial average leaped by 189.80 points to 10,555.25 shortly after the opening bell. The Standard & Poor's 500 Index and the Nasdaq Composite Index also started the session with robust gains. The Dow later ended the day 485.21 points up at 10,850.66.