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US shares wilted slightly today despite relatively upbeat trading in much of Asia and Europe, reflecting investor anxiety over the fate of the $700 billion banking bailout plan.

This morning, US shares fell by nearly 200 points, reversing yesterday's surprise rally, as investors worried how effective a bailout would be in averting recession for the economy. However, the Dow Jones recovered to close down 20 points at 10,831.07.

Investor anxiety followed shock new data from America's manufacturing sector revealed that activity has slumped to the lowest level since October 2001.

"Manufacturing could be on the brink of a collapse," Lindsey Piegza, a market analyst at FTN Financial told Bloomberg: "There are no orders, no jobs and there is really no incentive for businesses to invest. The credit crisis is compounding the problem."

The Institute for Supply Management's factory index showed that activity had fallen from 49.9 in August to 43.5 in September. Analysts had expected a reading of 49.5 in September.

This morning traders sent shares on the Dow Jones industrial average down 195.1 points as questions remained over what new terms will be contained in the rescue deal that was dramatically rejected by the House of Representatives on Monday evening. Investors are also believed to be nervous about how much support senators will give to the new deal as well as the exact timing of tonight's vote which can only take place after sundown in observance to the end of Jewish New Year.

On Tuesday, America’s Dow Jones industrial average rallied strongly to end trading 4.7 per cent higher following the previous day’s record 777.7 points fall — the biggest one-day points fall since Black Monday in 1987.

However, there were concerns that the rally in US shares may have lessened pressure on Washington lawmakers to push through a new rescue deal, which could include an agreement to increase the US Government’s guarantee on retail bank customers’ deposits.

In contrast to the US, London shares stayed in positive territory, closing up 39.42 points at 4,941.87, with HBOS and Lloyds TSB rising strongly after Prime Minister Gordon Brown stepped in to ensure the £12 billion deal will go through.

Yesterday HBOS, owner of Halifax and Bank of Scotland, suffered heavy losses on its share price when investors began to question the terms of Lloyds' offer to buy the troubled bank.

Mr Brown's intervention as well as hopes that Standard Life, a key investor in both banks, will support the deal helped send shares in HBOS and Lloyds higher.

However, HBOS stock, up 17 per cent at 144p, is still 23.4 per cent below the price per share Lloyds will pay for the company.

If the Senate vote through a revised deal tonight, and the House of Representatives follows suit, it is hoped it will restore confidence to the US and the global financial system and reduce the costs of borrowing between banks.

Earlier today, the Bank of England injected a further $30 billion into the wholesale market - where banks buy and sell each other's money - adding to the $40 billion it has injected since last Friday.

The injection helped reduce the cost of borrowing dollars between banks which spiked to 6.88 per cent yesterday, but fell back to 3.79 per cent today.

At the same time, demand for sterling has waned as banks scramble for dollars, and today the Bank of England drained £10 billion from the interbank market.

Earlier this week, the US Federal Reserve attempted to increase dollar liquidity by more than doubling its currency swap arrangement with global central banks from $290 billion to $620 billion.

Central lenders, including the Bank of England, can borrow dollars from the US to pump into their domestic financial systems with the aim of reducing the cost of borrowing between banks.

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