Europe fights to calm markets

The French government said the bailout was necessary to “guarantee continuity of funding for local authorities”.

Much of the turmoil was triggered by the decision by the US House of Representatives to reject a $700bn financial bailout deal on Monday.

Alan Fisher, Al Jazeera’s correspondent in London, said several Europen politicial heavyweights, including Angela Merkel, Germany’s chancellor, and Peter Mandelson, the European Union commissioner for trade, are now demanding that the US show leadership to restore order to the world markets.

Fisher said: “London, like the rest of the world is now waiting to see what the US does next. The proposed rescue plan is dead – doing nothing is not an option”.

‘Market meltdown’

Nicolas Sarkozy, the French president, began talks on the global crisis with finance executives on Tuesday and said he will meet this week with officials from Europe’s other G8 member states, Germany, Britain and Italy to discuss the issue.

Dariusz Kowalczyk, the chief strategist at broker CFC Seymour, said: “Market meltdown is likely to continue unless an alternative [US] plan is passed, which may or may not happen this week.”

Seeking to reassure investors, Christian Noyer, a European central bank governing council member, said: “There is no reason to be frightened and to give in to panic.

“I don’t say there won’t be things that will appear in the accounts that are published in the next weeks or months, but there is no drama in front of us.”

Trading suspended

After a day of volatile trading, European stock markets closed higher on Tuesday, getting a boost from a rebound on Wall Street as investors hoped another vote on the US bailout package will see the plan passed.

The Frankfurt exchange closed up 0.41 per cent, the Paris CAC 40 gained 1.99 per cent, the Madrid IBEX rose 0.38 per cent and the Moscow RTS was up 1.48 per cent.

After initially plunging on opening, London’s FTSE 100 recovered to gain 1.74 per cent on the day. 

In Russia, the Moscow stock market had been briefly suspended seconds after trading began, the second time the measure has had to be taken in a month.

Neave Barker, Al Jazeera’s correspondent in the Russian capital, said that following the suspension significant changes to trading rules had been made by regulators.

Barker said: “The regulator has made some crucial changes to how Russia’s markets function.

“They have allowed them to stay open longer and have also said that in the future markets will close if the exchange falls by five per cent as opposed to eight per cent as they did previously.”

The Kremlin has also announced it is placing a ban on the short-selling of shares.