Shares in Europe have rebounded from Monday's heavy losses, following a largely positive session in Asia.
Shares in Europe have rebounded from Monday's heavy losses, after a largely positive session for Asian stocks.
In London the FTSE 100 index was up 1.8%, in Frankfurt the Dax added 1.7% and in Paris the Cac 40 gained 1.4%.
In London the FTSE 100 index was up 2%, in Frankfurt the Dax added 1.8% and in Paris the Cac 40 gained 1.9%.
Asian markets were largely higher, Tokyo's Nikkei average closed up 1.5%, Hong Kong's Hang Seng added 1.3% and Mumbai's Sensex was up 1.4%.
Asian markets were largely higher, Tokyo's Nikkei average closed up 1.5%, Hong Kong's Hang Seng added 1.4% and Mumbai's Sensex was up 2.0%.
Investors are expecting the US Federal Reserve to slash interest rates later on Tuesday to boost the US economy.
But Shanghai's main index fell almost 4% on worries that Beijing will make further efforts to slow the economy.
Some think it might cut its benchmark Fed funds rate by one percentage point.
The main focus for investors on Tuesday is the interest rate meeting at the US Federal Reserve.
The rebound recovers some, but not all, of the losses on Monday.
Investors are expecting the US policy makers to slash interest rates later.
Investor fears
Some think the benchmark Fed funds rate will be cut by one percentage point, to 2%.
Shares on Wall Street had a volatile session on Monday.
Confidence
The Dow Jones industrials average ended 0.18% higher, after tumbling in early trading.
The Fed is battling to restore confidence in the US banking sector, as well as boosting the economy.
European shares had fared worse.
The emergency sale of Bear Stearns over the weekend rocked the markets.
The UK's FTSE 100 index, France's CAC 40 and Germany's Dax slumped by more than 3%.
Investors fear the credit crunch is escalating, which will make banks less willing to lend money and hit consumer spending.
Investors fear that the collapse of Bear Stearns, one of Wall Street's biggest names, means that the credit crunch is escalating, hastening the onset of a worldwide recession.
They are now awaiting results from some of the other key US investment banks, with both Goldman Sachs and Lehman Brothers reporting their latest results on Tuesday.
They are now awaiting results from some of the other key US investment banks, with both Goldman Sachs and Lehman Brothers reporting their latest results.
Central banks in both the UK and US have moved to ease the crisis.
central bank action
On Monday central banks in both the UK and US moved to ease the crisis.
The Bank of England injected £5bn to boost lending among banks, while the Fed cut its discount rate - the interest rate at which it lends to commercial banks - from 3.5% to 3.25%.
The Bank of England injected £5bn to boost lending among banks, while the Fed cut its discount rate - the interest rate at which it lends to commercial banks - from 3.5% to 3.25%.
And US President George Bush attempted to reassure investors, accepting that the American economy faced "challenging times" but insisting that the Fed was "on top of the situation".
And US President George Bush attempted to reassure investors, accepting that the American economy faced "challenging times" but insisting that the Fed was "on top of the situation".
"When need be, we will act decisively, in a way that continues to bring order to the financial markets," he said. "In the long run, our economy is going to be fine."
"When need be, we will act decisively, in a way that continues to bring order to the financial markets," he said. "In the long run, our economy is going to be fine."
Do you have any questions on how the world economic situation might affect you? Have you already been hit by tightening credit conditions? Send us your questions and experiences using the form below:
Do you have any questions on how the world economic situation might affect you? Have you already been hit by tightening credit conditions? Send us your questions and experiences using the form below:
