Frankfurt - European stock markets regained their nerve Tuesday, buoyed by the release of better-than-expected results from leading Wall Street investment banks and a solid opening on Wall Street. The New York Dow Jones Index's 1.5 per cent rise combined with earnings from Goldman Sachs and Lehman Brothers helped European bourses to claw back some of the heavy losses run up at the start of the week when a wave of fears about the US economic outlook sent global markets plunging.
Europe's the key blue-chip Euro Stoxx 50 index was up 3 per cent at 2,961 following the Wall Street opening and the release of the results from Goldman Sachs and Lehman Brothers.
The increase was mirrored across national bourses with banking stocks helping to spearhead the increase in European shares.
While Europe's premiere stock market in London was trading up 2.67 per cent at 5559.20 following Wall Street's opening, stocks in Zurich and Frankfurt were also edging towards 3 per cent. Paris had gained 2.43 per cent.
Tuesday's trading also formed part of the buildup to a US Federal Reserve's meeting Tuesday, which is expected to result in the US monetary authorities delivering what markets hope will be an economic confidence building 1-percentage-point rate cut.
This would be the Fed's biggest reduction in borrowing costs in about a quarter of a century.
In a bid to shore up the US banking and finance sector, the Fed launched a round of emergency moves.
Global investors were also shocked by the announcement of JP Morgan Chase's hastily pieced together government-backed takeover of another leading Wall Street investment house Bear Stearns, which had been badly hit by the US mortgage market crisis.
At the same time, looming large over the world's share markets has been the surge in oil prices which charged ahead by about 2.5 per cent to 106.80 dollars a barrel in European trading Tuesday.
Linked to the continuing rise in oil prices has been the slump in the dollar which slipped again in trading Tuesday as it headed back towards the all-time low it hit against the euro earlier this week of just short of 1.60 dollars.
Investor nervousness about the economic outlook also helped to keep the upward pressure on gold prices, which gained more than 1 per cent to rise to more than 1,011 an ounce Tuesday.
"We are facing one of the largest financial crises of recent decades," said German Finance Minister Peer Steinbrueck said, warning that the financial turbulence was spilling over into the real economy in countries outside the United States.
Speaking in Frankfurt late Monday, Josef Ackermann, the head of Germany's largest bank, Deutsche Bank, said the markets were unable to resolve the crisis on their own.
He called on governments to become involved to calm markets, in coordination with central banks and the private banking sector.
