Leading UK shares ended lower on Thursday afternoon, but recovered from the sharp falls seen earlier in the day.

The modest improvement in investor confidence followed a steady start to trading in New York, where investors had been braced for heavier falls.

The FTSE 100 index closed down 45.4 points, or 1.1%, at 4,240.

New York's Dow Jones index was down 24.4 points, or 0.25%.

Analysts had attributed London's falls to concern over a possible rise in UK interest rates.

There's plenty of nervousness and the market is still open to downside surprises Robert Parkes, HSBC Securities Latest moves on the FTSE

The slide began early on Wednesday, shortly after it emerged that four of the Bank of England's nine policy setters had voted in favour of an increase in rates earlier this month.

Shares in banks, mortgage lenders and housebuilders were among those hardest hit.

'Spooked'

Robert Parkes, UK equity strategist at HSBC Securities said: "Most of the market was looking for a rate rise [in the future], but the minutes [of the Bank of England meeting]... were perhaps slightly more hawkish than expected.

"That's spooked anything that's sensitive to the housing market."

Tom Hougaard of spread betting firm City Index added: "There had been so much complacency around and now with [the news from the Bank of England] yesterday and the Nikkei and Wall Street overnight there will be some scared people around.

"We were so deeply overbought, now we're just setting the record straight and that's quite encouraging, but I still think there's a lot more selling to come.

"I've got the feeling we've just started."

US slump

A slump of 149 points, or 1.5%, on Wall Street on Wednesday - its biggest percentage drop in a month - was also a factor in the FTSE's fall.

The US slide was blamed on disappointing financial results from some of America's biggest corporate names.

Drug maker Merck & Co sank $3.19, or 6.5%, to $45.72 after warning full year profits would not meet forecasts and announcing thousands of job cuts.

And America's second biggest chemicals maker DuPont posted a third-quarter loss, blaming high raw material costs.

Vulnerable

Todd Clark, a trader at Wells Fargo Securities, said: "We've had plenty of reason for profit-taking, and it's all because of these earnings.

"We had a pretty nice rally and now people are looking to take their money off the table."

Mr Parkes said: "There's plenty of nervousness and the market is still open to downside surprises.

"The positive corporate news is already priced in and the market is vulnerable to any disappointing economic data.