Iceland's stock exchange has plummeted by an astonishing 76 per cent during the first session of trading after a three-day suspension.

Market officials insist the figure has been heavily distorted by the absence of trading in finance companies.

The government has had to nationalise Iceland's three main banks, as the country teeters on the brink of bankruptcy.

Elsewhere in Europe, stocks have continued to bounce back.

The main indexes in London, Paris and Frankfurt are all up by about five per cent in early trading.