Shares close lower on Wall Street

Leading US shares have closed lower, with little sign that investors' pessimistic mood has begun to lift.

The benchmark Dow Jones index settled nearly 2% lower at 8,473.94, racking up losses for its seventh consecutive day for the first time since 1984.

The market expected too much out of Greenspan's comments

John Hendricks, State Street Global Markets

In Europe, markets staged late comebacks, with London's FTSE 100 closing modestly higher and Frankfurt's Dax also in positive territory.

The latest share price slump came despite calming words from US central bank chief Alan Greenspan.

And investors are braced for financial results from a string major US companies, including Apple Computer, Intel and Motorola.

Frayed

Most viewed Mr Greenspan as offering cautious optimism about the state of the world's largest economy, in his semi-annual report to Congress.

But some were disappointed that the world's most closely watched central banker failed to give a more certain picture of a return to US economic health and end to corporate scandals.

US volatility is driving global markets

"It wasn't strong enough or reassuring enough, but I am not sure he could have said anything other than what he said if he wanted to be accurate," said Hugh Johnson, chief investment officer at First Albany Corp.

Investor nerves are already frayed by doubts about the ability of US companies to generate increased profits and steer clear of accounting scandals.

Traders are trying to assess whether the markets are bottoming out, or whether there are more falls to come.

"I think the market expected too much out of Greenspan's comments," said John Hendricks, vice president, trading and strategy group at State Street Global Markets.

"At the same time, the whole crisis of confidence is outside his... control."

Rebound

Stock markets around the world are taking their lead from the US markets at present.

The wave of accounting scandals sweeping through the US has undermined investor confidence in corporate credibility as a whole.

As the markets enter a second week of turmoil, there is growing concern about the effect of falling markets on the global economy.

Falling stock prices generally lead consumers to cut spending, and could push the economy back into recession.

In the UK alone, £55bn was wiped off the value of shares on Monday, seriously damaging the pensions and investments of millions of savers.

London's FTSE 100 index posted slender gains on Tuesday, closing up 27.4 points at 4,021.9.

In Germany, Frankfurt's benchmark Dax index also climbed, settling 65.24 points higher at 3,977.75.

But Paris' Cac edged lower, falling 5,93 points to 3,317.81 at the close. Many investors are already rushing to take their money out of stocks, sending the markets tumbling still lower.