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Stocks find firmer ground after rout

European stocks stabilised and Wall Street rebounded at the opening bell following a rout in global stocks triggered by weak US data and worries about emerging markets.

LONDON: European stocks stabilised and Wall Street rebounded at the opening bell following a rout in global stocks triggered by weak US data and worries about emerging markets.

London's benchmark FTSE 100 index shed 0.18 per cent compared with Monday's close to stand at 6,454.25 points in afternoon deals, hit also by disappointing results from energy firms BP and BG Group.

Frankfurt's DAX 30 gave up 0.55 per cent to 9,136.17 points, but in Paris the CAC 40 index added 0.30 per cent to 4,120.07.

Madrid rose 0.46 per cent and Milan climbed 0.65 per cent.

The euro and the dollar both hit two-month lows against the Japanese yen -- considered a haven during uncertainty -- before staging a modest rebound.

The European single currency fell as low as 136.23 yen and the dollar slid to 100.76 yen in earlier Asian deals. The euro meanwhile dipped to US$1.3520.

"The market feels like it's been hit by a freight train and traders are asking what exactly is going on," said analyst Chris Weston at trading firm IG as the market struggled to find its feet.

"What started out as a profit-taking exercise has steamrolled into something far more substantial."

Asian markets slumped on Tuesday -- led by a four-per-cent fall in Tokyo -- following a huge sell-off on Wall Street as disappointing Chinese and US manufacturing data rocked sentiment.

"It is definitely a risk-off attitude that dominates the markets right now, sparked by the macro data that indicates that the two biggest economies in the world are losing momentum," added Varengold Bank analyst Anita Paluch.

"Reduced appetite for risk means equities are not in demand as investors avoid them and position themselves on the sidelines for the time being. Not much of a dip buying either in the sight; volatility is on the rise."

Traders were also spooked by a warning from Treasury Secretary Jacob Lew, who warned that the US borrowing limit will be reached on Friday, renewing fears of a Washington stand-off and possible default.

Japanese stocks noses dived 4.18 per cent, with the headline index shedding 14 per cent in a month after a huge rally last year, as the market enters what many analysts have called a correction phase.

Tokyo's Nikkei-225 index dived 610.66 points to 14,008.47, the worst one-day drop since June.

The market in Seoul sank 1.73 per cent and Hong Kong plunged 2.89 per cent, with Chinese tech giant Lenovo diving 16.40 per cent on fears it may have bitten off more than it can chew with the recent purchase of struggling Motorola from Google for US$2.91 billion.

Shanghai and Taipei were closed for the Lunar New Year holiday.

Wall Street rebounded at the opening bell as Microsoft made a long-awaited announcement on a new chief executive and a handful of corporate results bested expectations.

The Dow Jones Industrial Average advanced 0.24 per cent to 15,409.86 points, the broad-based S&P 500 picked up 0.44 per cent to 1,749.55, while the tech-rich Nasdaq Composite Index gained 0.49 per cent to 4,016.58 after five minutes of trading.

However, Wall Street posted losses of over 2.0 per cent on Monday after a surprisingly weak US manufacturing report sparked concerns about the strength of the world's number one economy.

The Institute for Supply Management on Monday said its purchasing managers index (PMI) of manufacturing activity fell to 51.3 in January from 56.5 in December.

Over the weekend, meanwhile, China released official figures showing its PMI fell to 50.5 in January from 51 in December and HSBC last week said its PMI for the country came in at a six-month low of 49.5.

Emerging markets have also been shaken by the prospect of capital flight as the US central bank pulls back on its stimulus programme, which has been widely credited with fuelling an equities rally last year.

Gold slid to US$1,253 an ounce from US$1,262 an ounce on Monday on the London Bullion Market.

BP shares slid 0.9 per cent to 469 pence after the energy major disappointed traders with falling fourth-quarter profits.

Shares in Microsoft rose 1.4 per cent after the company said that founder Bill Gates was stepping down as chairman to become a technology adviser and Satya Nadella, head of its cloud-computing division, would succeed Steve Ballmer as chief executive.

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