LONDON - WORLD stock markets sank amid disappointing corporate news, then regained some of their losses in Europe and Asia, while Wall Street settled in positive territory after an erratic opening.

Britain's FTSE 100 index of leading shares was down 5.46 points, or 0.1 per cent, lower at 4,035.43, and Germany's DAX was down 118.26 points, or 2.6 per cent, at 4,452.81. The CAC-40 in France was 41.85 points, or 1.3 per cent, lower at 3,256.33.

Europe's indexes had been even lower earlier but Wall Street's modest bounceback after two days of losses prompted some buying. The Dow Jones index of leading US shares recovered from a 100 point deficit to trade 72.48 points, or 0.9 per cent, higher at 8,591.69.

Earlier, Japan's Nikkei 225 stock average tumbled 7 per cent at the open to a five-year low but recovered to close down 2.5 per cent at 8,460.98, while Hong Kong's Hang Seng Index was down 4.7 per cent at 13,603, but had fallen more than 6 per cent earlier.

Despite the slight improvements, fears about the global economy remain the primary concern in the markets as worries over credit markets and the banking system have been assuaged, for now at least, by government efforts to shore up banks, as well as massive liquidity boosts from the world's leading central banks.

This week's latest stock market jitters around the world have been stoked by a stream of disappointing earnings updates, particularly in the US over the last few days.

'It's all fairly gloomy and sentiment is really at a low ebb,' said 4CAST analyst Paul Bednarczyk Disappointing corporate news continued on Thursday with Xerox Corp. announcing plans to cut 3,000 jobs, or 5 per cent of its work force, because a slowdown in orders from large US companies has dragged down the printer and copier maker's profit margins.

Meanwhile, drugmaker Eli Lilly and Co. said it booked a loss for the third quarter after taking a charge of almost US$1.5 billion for an expected settlement of an investigation into the marketing of its top-selling drug, Zyprexa.

Economic readings didn't help to lift underlying sentiment. The Labor Department reported Thursday that new applications for unemployment benefits rose 15,000 last week to a seasonally adjusted 478,000. That was slightly above analysts' estimates of 470,000.

Jobless claims above 400,000 are considered a sign of recession. A year ago, claims stood at 333,000, the department said.

Though the solvency of banks across Europe and the US is less of an issue in the markets, their upcoming earnings are likely to be hit hard by the global economic downturn and that weighs on their share prices. Notable losers Thursday were BNP Paribas SA, down 2.5 per cent and Barclays PLC, which was 5.6 per cent lower.

One bright spot was the performance of Nestle SA, the world's biggest food and drink company, which saw its shares 5.2 per cent in Zurich after it reported buoyant sales growth for the first nine months of the year.

Though the markets remain preoccupied with the general economic environment they continue to keep a close watch on interbank lending rates, which continue to fall, albeit relatively slowly.

Figures released on Thursday suggested that a return to more normal market conditions will take time. The rate on three-month loans in dollars - known as the London Interbank Offered Rate, or Libor - was unchanged at 3.54 per cent. The rate fell to that level on Wednesday and is the lowest since Sept 24.

The so-called European Interbank Offered Rate for three-month euro-denominated loans has dropped to 4.92 per cent from 4.94 per cent the day before.

The rates have fallen steadily for over a week, but spreads remain high, suggesting that banks remain wary of lending to each other.

Abnormally high interbank lending rates and spreads have been the catalyst for the crisis in the financial markets over recent weeks, raising fears they would choke off credit to businesses and individuals.

Earlier in Asia, Japanese electronics powerhouse NEC Corp. plunged 8.5 per cent after slashing its full-year earnings estimates Wednesday, blaming weaker demand for mobile phones and computer chips.

Japanese exporters, such as Mazda Motor Corp. and Isuzu Motors Ltd, were also battered by the surging yen against the dollar and euro.

Elsewhere Australia's key index pulled back more than 4 per cent as slumping world commodity prices sent resource companies lower.

Rio Tinto fell more than 14 per cent while rival BHP Billiton sank more than 9 per cent.

And South Korea's benchmark Kospi fell 7.5 per cent at 1,049.71, having been down 9.4 per cent at one stage.

Oil rebounded modestly after plummeting more than US$5 overnight to near 16-month lows. Sweet crude for December delivery rose US$1 to US$67.75 a barrel.

On the currency front, the dollar was down 0.4 per cent at 97.35 yen. In two months, the yen has gained more than 10 per cent against the dollar.

The euro was 0.4 per cent lower at US1.2808 while the British pound fell another 1 per cent to US1.6109. -- AP