Sydney was one of the exchanges which saw losses on Tuesday

Asian and European share indexes have continued to fall sharply on Tuesday amid fears of a recession in the US leading to a global economic slowdown.

But London's main FTSE 100 share index bucked the trend, reversing an early decline of more than 3% to trade 1% higher, following Monday's 5.5% falls.

Earlier, Asian markets had tumbled with Japan's Nikkei index closing down 5.7%, taking its decline this year to 18%.

Many analysts are predicting indexes could fall further in coming weeks.

The recent falls were triggered by fears of a global recession, after growing concern that a proposed US stimulus package, which would involve about $145bn (£76bn) in tax cuts to encourage spending, might not be enough.

Dominique Strauss-Kahn, the head of the International Monetary Fund, said the global economic situation was "serious" and that all countries in the world were suffering in the wake of a slowdown in US growth.

The drop in stock markets was also having an effect on other assets.

Government bond prices have risen, as many investors look for assets which guarantee safer returns.

At the same time, crude oil and metals prices have fallen because of expectations that slower global economic growth will hurt demand.

'Remain calm'

In Mumbai on Tuesday, India's main stock index, the Sensex, fell 9.8% within minutes, triggering an automatic one-hour halt in trading.

The loss in Indian shares came after a fall of 7.4% on Monday, the Sensex's worst day.

India's Finance Minister P Chidambaram has urged Indian investors to "remain calm" and advised them to "stay invested".

It basically stems from the United States Hiroko Ota Japanese minister for economic and fiscal policy Q&A: Stock market falls Bear market may be looming

Mr Chidambaram said that "enough liquidity will be provided to the brokers to tide over the present crisis".

In China, the main Shanghai Composite Index closed down 7.2% at a five-month low, having lost 17% in the past six days of trading.

Trading was also suspended briefly in South Korea, where the market dropped more than 6%, while Hong Kong's Hang Seng index lost more than 8%.

South Korean shares lost about 5% of their value, with Sydney's market continued its longest losing streak for 26 years, closing 7.1% lower.

Global co-operation

The Japanese government said it saw no reason to intervene to support the markets and a Bank of Japan meeting left interest rates unchanged.

"Stock markets across the world are falling and it basically stems from the US," said Hiroko Ota, the minister for economic and fiscal policy.

"It is difficult at the moment to mull action by Japan alone. Instead, we should co-operate globally," she said.

The Brazilian stock market - the largest in the region - fell by 6.6%, while Mexico's IPC index fell 5.4%.

Brazil's real dropped by 2.5% against the dollar, and Mexico's peso lost 0.9% against the US currency, registering a five-month low.

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