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Nervous European Markets Follow US Congressional Bailout Failure


European shares extended gains by midday on Tuesday with banks rebounding from lows ahead of U.S. President George Bush's speech on the financial sector rescue package. Britain's benchmark stock index, the FTSE 100, fell by as much as 3 percent in early trading, with particularly sharp declines in the banking sector. But it gained some ground a few hours after the market opened. For VOA, Tom Rivers reports from London.

After seeing the U.S. House of Representatives reject the $700 billion rescue deal, European markets tried with difficulty to find a meaningful direction.

Sharp declines were seen at the opening, but by midday some of that lost ground had been clawed back.

Despite the midday comeback, however, the battered financial sector in Europe took steps to stem losses.

Belgian-French financial services group Dexia got a much-needed boost of $9.18 billion from public shareholders to help it fight the global credit crisis. Ireland also offered to guarantee all bank deposits for two years to improve banks' access to funds on international markets.

British Prime Minister Gordon Brown says the failure to pass the U.S. bail out plan is being felt far beyond American shores.

"We have obviously sent a message to the White House about the importance that we attach to taking decisive action in America," Mr. Brown said. "I think it is true to say however that in recent times we in Britain have taken decisive steps to ensure the stability of our system."

And following Monday's partial nationalization of the British mortgage lender Bradford and Bingley, many are concerned that other financial institutions might be tottering as well on the edge. Given this uncertainty, Brown gave this assurance.

"The Governor of the Bank of England and the Chancellor and I are making it absolutely clear that we will do whatever is necessary to ensure the stability of our system to the benefit of families and businesses across the country," he said.

Markets in Europe are now trying to focus on what the next step will be for rescue-related legislation.

Meanwhile, U.S. stock index futures rose Tuesday, pointing to a partial rebound, as investors bet that Washington will work to revive a plan to stabilize the U.S. financial system.

In Asia, markets were mixed on Tuesday. In Tokyo, the Nikkei ended the day just over four percent down, while Hong Kong's Hang Seng Index gained nearly one percent.

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