While the Australian share market remained in the red territory by early afternoon, it was off its lows as several investors tentatively sought bargains.
Meanwhile, the Australian dollar also recovered and was exchanging above US85 cents.

Fund manager Fidelity International said in a mid-year report that conditions for equities would improve in the second half before a firm rally in 2011.

"Valuations are still good and I believe there will be good buying opportunities later in the year," said Trevor Green, the company's international director of asset allocation.

"So, investors who missed out on the first leg of the bull market may find themselves presented with attractive entry points in the coming months.

"While the pace of the recovery will slow into 2011, global growth remains strong and I believe we are unlikely to see a double-dip recession.

"There will be a number of attractive entry points for investors in the second half of 2010 and I am optimistic about 2011, so watch this space," Mr Green said.

The gloom in the domestic market followed sharp sell-offs in Chinese, European and North American equities and a fall in copper and oil prices.
Westpac analysts called the selling in global equity markets "vicious."