US stocks rose today after CNBC television reported that US government money had now been put on the table in discussions over a financial lifeline for embattled insurer American International Group .
The Dow Jones industrial average rose 27.93 points, or 0.26 percent, to 10,945.44. The Standard & Poor's 500 Index gained 2.58 points, or 0.22 percent, to 1,195.28. The Nasdaq Composite Index rose 5.21 points, or 0.24 percent, to 2,185.12.
Stocks had slid earlier as investors feared that without a financial lifeline, AIG's survival might come into question as the credit squeeze weighs on the company.
Shares of AIG, a Dow component, pared losses to trade off 18 per cent at $3.90. Earlier the stock had plunged by more than 40 percent amid uncertainty about a potential rescue deal.
Worries about AIG were accentuated by concerns that the US government would refuse to provide a financial lifeline as it did in the case of Lehman Brothers Holdings. The 158-year-old Wall Street icon subsequently filed for bankruptcy protection yesterday.
Comments from computer maker Dell that it was seeing further softening in global demand for technology further soured the tone after Monday - Wall Street's worst day since markets reopened after the September 11, 2001 attacks.
Dell shares slid more than 10 per cent to $16.18, making the stock one of the top drags on Nasdaq.
Britain's leading share index earlier dropped to a three-year low around today.
At 12.11pm the Ftse100 was down 161.3 points, or 3.1 per cent, at 5,047.3, more than a three-year low, extending yesterday's 3.9 per cent drop.
UK insurers were weak, reflecting AIG's woes, with Admiral Group, Legal & General and Aviva down between 3.7 and 5.5 per cent.
UK banks were hardest hit for the second successive session with the sector also nervous ahead of results from Goldman Sachs.
HBOS, Royal Bank of Scotland, Lloyds TSB, and HSBC were down between 6 and 21 per cent.
Earlier the benchmark Nikkei average slid 5 per cent to a three-year low, with investors dumping shares across the board after Lehman Brothers' collapse fuelled fears about the US financial system and hit stock markets worldwide.
Japan's top three lenders plunged, with Mizuho Financial Group and Sumitomo Mitsui Financial Group losing about 10 per cent.
Both the Nikkei and the broader Topix index, which dropped 5.1 per cent, booked their biggest percentage falls in eight months.
After a holiday yesterday, investors in Tokyo came back to work to find Lehman Brothers had filed for bankruptcy and Bank of America had agreed to buy Merrill Lynch in the biggest financial shake-up since the Great Depression.