A late rebound extended yesterday's recovery for many stock indices as investors shrugged off news that another major Japanese financial institution has collapsed. The Dow Jones industrial average rose 54.46 points to 7,881.07 despite slipping to a 35-point loss with less than two hours left in the session.

Several other measures also turned higher before the close despite falling after reports that Japan's Yamaichi Securities has collapsed under the weight of £16 billion of debt.

The Nasdaq market, dominated by technology companies that are perceived to have the greatest exposure to Asia's economic woes, trimmed its losses, but finished lower for the day.

Stocks started the day higher, with the Dow gaining nearly 55 points after Asian financial markets reported some big gains. Stocks in Hong Kong surged 5 per cent overnight and Tokyo share prices rose 2.5 per cent. Gains were also seen throughout Europe.

Advances outnumbered declines by a six-to-five margin on the New York Stock Exchange.