US stock markets steadied to close little changed on Tuesday, after falling steeply the previous day, when two major indexes hit eight month lows.

Plunging US share prices set off a chain reaction in Asia and the major European markets on Tuesday.

Benchmark stock indexes in Tokyo, Frankfurt and Paris all closed lower.

The London Stock Exchange was unscathed as it was closed for the Queen's Jubilee.

Corruption fears

Worries about the ability of US firms to tackle falling profitability, and growing concerns about accounting standards and corporate corruption sparked Monday's mayhem.

Those anxieties received further fuel on Tuesday with tax avoidance charges against ex-Tyco chief executive Dennis Kozlowski and news of an insider trading inquiry at stockbroker Knight Trading.

"There's a fear about business corruption, and it's going to take time for people to get comfortable again," said Rick Meckler, president LibertyView Capital.

US central banker Alan Greenspan also gave a cautious assessment of the country's economic prospects after the market closed.

Greenspan's warning

New York's technology-heavy Nasdaq index closed 1% higher on Tuesday, after falling to an eight month low the previous day.

The Dow Jones industrial average was down 0.43%, while the broader S&P 500 was unchanged.

But bargain hunting was limited by the nervous mood as many smaller investors are becoming reluctant to trade, analysts said.

Shares in Knight Trading Group slumped 22% to $4.64 after it emerged that the stockbroker was being investigated by market regulators over alleged insider trading.

Knight, the biggest trader in Nasdaq-listed stocks, has said it is "comfortable" it has done nothing wrong. "We will be totally vindicated," said chief executive Thomas Joyce.

Mr Greenspan said the US economy was going through a "soft spot" and the upswing, though real, "was not going to be a dramatic upswing".

The previous day's plunge in US stock markets sent Asian shares tumbling on Tuesday and the battered technology sector was, once again, the worst hit.

Japan's benchmark Nikkei index suffered its biggest fall in eight weeks, losing 2% of its value.

Leading indexes in France and Germany fell in sympathy.

In Frankfurt, the Dax index shed 2.6% and Paris' blue-chip Cac 40 closed 3.8% lower.