Stock markets around the world skidded lower again Monday, with Tokyo's main index hitting a 17-year low — but European markets staged a recovery in the afternoon to limit their losses.

London's key index dipped below 5,000 for the first time in nearly three years and European key indexes fell 3 percentage points or more in earlier trading, before staging a late recovery.

The European rebound came as prices stabilized on the New York Stock Exchange. The Dow Jones industrial average closed down 0.34 at 9,605.51, according to preliminary calculations, recovering nearly all of an early drop of more than 100 points.

Tokyo's benchmark 225-issue Nikkei Stock Average closed down 321.10 points, or 3.05 percent, to 10,195.69. It was the lowest finish for the index since Aug. 2, 1984, when it closed at 10,086.87.

In Europe, the Financial Times-Stock Exchange 100-share index closed 0.73 percent lower at 5,033.70, down 36.60 from Friday's close. The blue chip index rebounded strongly after tumbling 3.4 percentage points to 4,895.90 earlier in the session. The index last closed below the psychologically important 5,000 level on Oct. 13, 1998.

In Paris, the CAC40 index finished 0.67 percent lower, down 29.77, at 4383.74. The French index fell as much as 3.6 percent before clawing back much of its losses by the end of the day. The CAC40 closed at its lowest level since Aug. 13, 1999.

In Frankfurt, the Xetra DAX index of German blue chips was 0.38 percent lower at 4,712.90, as the Deutsche Boerse continued trading into the evening. The Xetra DAX had plummeted 4.3 percent before rallying.

The SMI index in Zurich, Switzerland, finished 2 percent lower at 6128, and the AEX index in Amsterdam closed 0.5 percent lower at 483.53.

David Sneddon, a technical analyst with Credit Suisse-First Boston, said 4,900 is now the key level for the London market. ``We should see some stabilization and consolidation at this level in the near term,'' he said.

The world's markets have been depressed by the economic slowdown in the United States, and more bad news from Washington on Friday continued the downward pressure.

A Labor Department report said U.S. unemployment soared to 4.9 percent in August - its highest level in nearly four years - and businesses slashed 113,000 jobs. The figures reinforced fears of a protracted slump.

Yasuo Fukuda, chief spokesman for the Japanese government, said the Tokyo market's decline was hurt by weak stock markets overseas and that current stock prices did not reflect Japan's economic fundamentals.

``Personally, I doubt if it reflects Japan's economic situation,'' Fukuda told a regular news conference Monday. ``We have to watch the situation calmly,'' he said.

The broader Tokyo Stock Price Index of all issues listed on the first section finished down 24.85 points, or 2.30 percent, to 1,055.98.

Reuters and the Associated Press contributed to this report.