Pakistani troops killed 35 militants in fighting in the Swat Valley northwest of Islamabad yesterday, shortly after a suicide car-bomber killed eight policemen.

Mounting violence is adding to a sense of urgency for a fractious coalition government to end infighting and turn its attention to security and pressing economic problems.

Insecurity, combined with uncertainty over the future of the government and worry about the economy, has undermined investor confidence and sent the country's financial markets on a downward spiral.