LONDON, Oct 17: Stock markets bounced from valley to peak on Friday in choppy trade that saw big gains in Europe but a loss of momentum on Wall Street, with investors frazzled in the face of a looming global slowdown.

The Dow Jones Industrial Average fell hard in opening deals on more bad news from the US housing sector, later reversing course before sliding back into negative territory at mid-day.

Trading was erratic throughout the day in Europe, with prices rising and falling and rising again to close with gains of 3.0 and 5.0 per cent in London, Paris and Frankfurt despite persistent fears for the health of the global economy.

“Equity markets remain in something of a quandary as we approach the weekend break,” said CMC Markets dealer Matt Buckland, adding that investors were trying to determine whether markets had hit rock bottom or had further to fall.

“While this dilemma continues, it seems as if the volatility we’ve seen of late will struggle to fade and it’s also going to be difficult to call an end to these choppy market conditions,” said Buckland.

“Despite worldwide efforts to stabilise financial markets, fears the global economy is headed for recession continue to reverberate” around the world, noted NAB Capital economist David De Garis.

Hanging over Wall Street on Friday was a report showing construction starts on new US homes plunged an additional 6.3 per cent in September to the lowest level since the recession in 1991.

Analysts said the report was the latest in a series of recession-like indicators for the US economy. The sharp downturn in the US housing sector over the past year has undermined the value of billions of dollars in mortgage-backed securities held by big banks around the world.

With their assets de-valued, banks had all but stopped lending money to each other and to businesses, depriving the global economy of critical credit and spurring governments to intervene with bank rescue packages and partial nationalisations.

In the aftermath of such interventions, said Fred Dickson at DA Davidson & Company, the stock market was continuing a “manic-depressive journey.”

“Wall Street still hasn’t calmed down following last week’s massive Treasury initiatives that made the US government a partner with private owners of a broad array of major financial institutions, among other things.” he said.

“The big question remains: ‘When will the credit crisis begin to thaw?’ Signs still point to a financial system locked in banking gridlock.”

The Dow was down 0.38 per cent at 8,945.01 at mid-day while the tech-heavy Nasdaq had lost 0.15 percent and was at 1,715.18.

In London the FTSE 100 index surged 5.22 per cent to 4,063.01 while in Paris the CAC 40 added 4.68 per cent to end the day at 3,329.92.—AFP