KARACHI - Several thousand mourners attended funerals on Tuesday for victims of a suicide bombing that killed 43 people in Pakistan's commercial capital, an emotional reminder of a raging Taliban insurgency.

Coffins were carried through the crowds after Monday's explosion in Karachi during a procession at the climax of Ashura, one of the most important events in the Shi'ite calendar.

The bombing underscored multiple security challenges facing nuclear-armed U.S. ally Pakistan at a volatile time for President Asif Ali Zardari, who could be weakened further if corruption charges against his close aides are revived.

His political troubles are accompanied by heavy pressure from Washington to root out militants it says use sanctuaries in Pakistan to cross over and attack U.S.-led troops in neighboring Afghanistan.

The government launched a security crackdown last October against al Qaeda-linked Taliban militants in their tribal strongholds in northwest Pakistan and retaliatory bombings since have killed hundreds of people across the country.

Although the government blamed militants for the Karachi attack -- the third in as many days -- some mourners expressed disbelief that fellow Muslims were capable of such carnage.

I am 100 percent sure that the United States and its agents are behind this attack, and all other such attacks in the country, said Syed Kausar Hussain Zaidi, a Shi'ite lawyer.

Other mourners were furious, shouting confusing slogans.

Down with America. Down with the Taliban. Down with Israel.

Religious scholars urged people to remain peaceful.

In a sign of growing anxiety, trading at Karachi's stock market ended 75 minutes ahead of the normal 1030 GMT close due to safety concerns, said one of its officials.

Investors have factored in the violence. But sustained trouble could hurt financial markets in an economy in virtual recession. The index ended 0.12 percent lower at 9,410.66 points amid thin trade.

The attack may have been a bid to ignite sectarian bloodshed to create new security crises. Pakistani paramilitary forces patrolled nearly empty streets.

I appeal to the people of Karachi to stay peaceful. This is the economic hub of Pakistan, Interior Minister Rehman Malik told reporters after attending the funeral of a paramilitary soldier who authorities said pounced on the suicide bomber.

Pakistan's powerful military has been cracking down on militants in lawless areas in the northwest. But rugged mountain terrain makes it difficult for troops to make advances.

We are conducting military action in their strongholds at the grassroots. They are destroying the peace of the country, said Prime Minister Yusuf Raza Gilani.

The provincial government declared a public holiday. Public Shopkeepers surveyed their gutted premises.

Our office and the whole building is completely burned. Everything has been destroyed, said Saleem Khan, who runs a car rental business along what is normally a busy road.

Initial investigations showed the suicide bomber was aged between 18 and 20, and that he used 8-9 kg (18-20 lb) of explosives, police said. At least 500 shops had been set ablaze.

Health officials said 52 people were still in hospital.

(Additional reporting by Sahar Ahmed & Augustine Anthony in Islamabad; Writing by Michael Georgy; Editing by Nick Macfie)