Dow Jones in recovery mode after sell-off

Wall Street shares surged back this afternoon after a late sell-off yesterday.

The Dow Jones Average leapt almost 180 points amid positive economic reports from China, Japan and Australia although a report on employment in the US was seen as being disappointing.

The market got a lift from a stronger euro, which climbed back above $1.20. The US Federal Reserve chairman, Ben Bernanke, said debt problems in Europe might only amount to a "modest" drag on the American economy if the financial markets can halt their slide.

Traders have been anxious about the health of Europe's economy as governments plan deep spending cuts to reduce debt.

Analysts said the dip in Wall Street stocks would be short term. "We do put the odds pretty high that Bernanke is correct and that this is more short-term blip than anything else," said David Chalupnik, head of equities at First American Funds in Minneapolis.

The FTSE 100 index was also up this afternoon despite the huge share-price tumble at BP.