Stocks stabilize after Monday's rout

World stocks stabilized Tuesday, ending days of sharp declines with London and Paris closing higher as US stocks surged. London's FTSE-100 index closing up 1.89 percent to 5,164.92 points and the CAC-40 in Paris gaining 1.63 percent to 3,176.19 points. In Frankfurt the DAX ended nearly flat with a drop of 0.10 percent to 5,917.08 points. In midday trading, US stocks were on a strong upswing, surging almost two percent, one day after their steepest plunge since the 2008 financial crisis. In Madrid, the Ibex-35 slipped 0.36 percent and in Milan, the FTSE MIB rose 0.52 percent. In Athens the Athex index closed up by 0.19 percent, in Lisbon the PSI-20 fell by 0.99 percent, In Amsterdam, the AEX index rose 1.30 percent, in Brussels the Bel-20 gained 2.80 percent and in Switzerland the SMI index rose 0.60 percent. At 1630 GMT the Dow was up 1.97 percent, the broader S&P 500 rose 2.7 percent while the tech-heavy Nasdaq Composite picked up 3.6 percent. The rebound came after Monday's rout, the biggest plunge since the financial crisis of 2008, driven by the news that Standard & Poor's had downgraded the US credit rating as well as worries about a new recession. The Dow lost 5.6 percent, the S&P 500 6.7 percent, and the Nasdaq 6.9 percent. Traders were looking ahead for inspiration from the Federal Reserve's policy-setting committee, which was meeting Tuesday morning to discuss what can be done to boost the sagging economy. "This positive price action comes ahead of the Federal Open Market Committee's latest decision on monetary policy," said Sarah Wasserman of Schaeffer's Investment Research. "While the Fed's been non-committal about additional monetary easing, Friday's downgrade has spurred hopes that additionl assistance from the government could, perhaps, be on the horizon."