Asian stock markets spiralled lower in Thursday trading on fears that more companies could fall victim to the global financial crisis.
Markets regained some poise in Thursday trading, cheered by news that six of the world's top central banks have taken steps to calm credit markets.
Rescues of US insurance giant AIG and UK lender HBOS have failed to ease the fear gripping investors worldwide.
European stocks edged higher as Lloyds TSB's takeover of UK lender HBOS also dispelled some of the gloom hanging over the financial world.
Tokyo's Nikkei share index dropped by 2% while Hong Kong's main stock index slid by 7%.
London's FTSE 100 index rose along with German and French markets.
Analysts expect trading to continue to be rocky, with European markets also expected to continue to fall.
But trade is expected to stay volatile as fears linger that more firms could succumb to the financial crisis.
Share indexes in Shanghai, Taiwan and India fell by between 3 and 5%.
The past few days have seen a number of dramatic developments on financial markets. Thursday's key events include:
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Central
banks in the UK, US, Europe and several other countries are pumping billions of dollars of extra funds into money markets to lift the amount of credit available. The move is the fourth such concerted effort since the onset of the credit crisis last year.
The
news helped the dollar, which had fallen this week against the euro and the yen, and it also cut the interest rate at which banks lend to each other - a key factor behind the problems in credit markets.
Cautious
investors are looking for safer places to put their money. The price of gold, regarded as a haven in troubled times, rose to $871.2 an ounce after recording its biggest one-day gain in history on Wednesday.
Lloyds
TSB released details of its £12.2bn takeover of HBOS. The deals values HBOS shares at 232p each, is expected to lead to cost savings of £1bn a year and could also result in significant job losses.
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Russia's
main stock exchange suspended trading for a second consecutive day as the government tried halt a sharp fall in share prices and restore confidence in the economy.
Oil
prices fell to $96 a barrel on fears that the deepening financial crisis will hurt the wider economy and dampen demand for crude.
Hong Kong's Hang Seng index dropped below the 17,000 mark and Australian shares closed 4% lower.
Banks take action
The action taken by the central banks will see the US Federal Reserve inject a further $180bn (£99bn) into the money markets. The Bank of England is releasing $40bn, while the European Central Bank is to provide a further $55bn. The credit crunch is creating a new world order in banking and finance Robert Peston, BBC business editor Read Robert's blog
The news helped to boost confidence on European stock markets although analysts doubted it would have a long-term impact.
"Markets know that central banks don't own a magic bullet, otherwise they would have used it already," Sean Callow, currency strategist at investment firm Westpac.
"And we've seen these sorts of steps before; it only addresses one of the symptoms of the underlying crisis."
In morning trade, the FTSE 100 index was up 59 points at 4,971.6. Germany's Dax index was up 0.12% and France's Cac 40 was up 0.24%.
In Asia, Hong Kong ended flat at 17,632.5 after earlier falling by 7% as fears of more company failures gripped investors.
Tokyo's Nikkei share index ended 2% lower. Share indexes in Shanghai, Taiwan and India fell by between 3 and 5%.
On Wednesday, the Dow Jones index of leading US stocks fell by more than 4%.
On Wednesday, the Dow Jones index of leading US stocks fell by more than 4%.
Flight to safety
Market turmoil
Brokers in Japan say the markets are in freefall because investors fear the US government's efforts to stop the turmoil in the financial system are not working.
Markets have been on a white-knuckle ride this week, with the collapse of 150-year old investment bank Lehman Brothers quickly followed by a government rescue of US insurance giant AIG.
As a result, investors are looking for safer places to put their money than stocks and shares.
Another investment bank, Merrill Lynch, has been taken over by Bank of America.
Traders saw plummeting shares on Wall Street on Wednesday
The flight of investors from shares has taken the price of gold, traditionally seen as a haven in troubled times, to a 10-year high.
Many Japanese institutions have assets insured by AIG, the insurance company that was rescued by the US government on Tuesday.
And in Singapore, for the second day running, hundreds of AIG policyholders queued up outside its offices trying to surrender or cancel policies they fear could turn out to be worthless.
Feverish speculation
The US Federal Reserve's AIG rescue package followed the collapse earlier this week of 150-year-old US investment bank Lehman Brothers, which sent shockwaves through the world's financial community and sparked a global share price plummet.
Another investment bank, Merrill Lynch, has since been sold off to Bank of America. And in the UK, HBOS is being taken over by Lloyds TSB in a £12.2bn deal.
There has also been feverish speculation about the future of two other leading US banks - Morgan Stanley and Washington Mutual.
There has also been feverish speculation about the future of two other leading US banks - Morgan Stanley and Washington Mutual.
The New York Times quoted unnamed sources as saying an auction for Washington Mutual was under way. The Wall Street Journal reported that both banking giant Citigroup and Wells Fargo had expressed an interest in a takeover.
The BBC's business editor Robert Peston said that even Goldman Sachs, the pre-eminent investment bank cannot be confident it can thrive and survive as an independent.
Meanwhile the Reuters news agency reported that Morgan Stanley, the second largest US investment bank in the US which on Wednesday saw a quarter of its value wiped off its share price, had held preliminary takeover talks with Wachovia.
"The credit crunch is creating a new world order in banking and finance," he said.
None of the companies involved has made any comment on the speculation and no negotiations can be confirmed.
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Banks take action
The Bank of Japan has injected another 1.5 trillion yen ($14.4bn; £7.9bn) into money markets to help stabilise them. Australia took similar steps.
The Japanese central bank's injection was the third consecutive day it had tried to shore up cash markets as the Nikkei trades at a three-year low.
Across Asia, central banks have already pumped $33bn into money markets this week in an attempt to allay investors' concerns and ensure the supply of funds does not dry up.
