The FTSE-100 index fell to its lowest level for three years and below the psychologically significant 5,000 mark yesterday. Other European markets lost up to 3 per cent of their value in early trading before the firmer opening on New York markets allowed shares to recoup most of their losses.

And while European dealers welcomed the unexpected respite from Wall Street, they said that yesterday's recovery was tentative and there were still fears that a global slowdown could deteriorate to a recession.

At the lows, some £40 billion sterling (€65 billion) had been wiped off the value of British shares as the market suffered its worst slump since the emerging markets crisis of late 1998.

The FTSE 100 ended down 36.6 points or 0.72 per cent at 5,033.7, off a low of 4,895.9.

The index fell 134 points on Friday and is still down 19 per cent this year. Paris and Frankfurt markets closed marginally lower on the day.

The pan-European FTSE Eurotop 100 index fell 0.4 per cent and closed on 2,660 after dipping as low as 2,575. The Irish stock market failed to benefit significantly from the firmer New York opening and closed almost 2 per cent lower.