Indian and Pakistani troops exchanged fire in disputed Kashmir today but financial markets rallied in both countries on optimism over international efforts to avert war.
One Indian civilian was killed in an exchange of fire between the troops, who have been pounding each other for nearly a month after an attack on an Indian army camp brought the nuclear rivals to the brink of war.
But a Pakistani official said firing across the border between Pakistan's Punjab province and India's Jammu and Kashmir state had been restricted to light-arms fire, with artillery there silent since yesterday.
Sporadic fighting has continued despite hopes of a breakthrough during a peace mission this week by US Defense Secretary Donald Rumsfeld to India and Pakistan, who have massed a million men along the border.
Indian newspapers said Mr Rumsfeld was expected to visit New Delhi first on Tuesday, seeking a commitment from India to take some initial steps towards reducing tensions.
He would then go to Islamabad to convince Pakistan President Pervez Musharraf that he in turn must take further steps to crack down on Islamic militants.