Assassinated Prime Minister Benazir Bhutto's widower, who heads the largest party in Parliament, emerged as a likely candidate to become the next President of Pakistan, as the second biggest party in the coalition threatened to pull out.

Then, in the afternoon, the country's newscasters turned their attention from political speculation to breaking news of one of the country's deadliest-ever bomb attacks.

Two suicide bombers blew themselves up outside Pakistan's main defence industry complex as workers were leaving at the end of their shift, killing 59 people, a hospital official said.

The Pakistani Taliban later claimed responsibility for the carnage.

Allies and investors had hoped close US friend Musharraf's resignation on Monday would bring a quick end to political wrangling and a shift of focus towards tackling increasing violence and economic problems. That now appears unlikely.

The coalition's second biggest party, that of former Prime Minister Nawaz Sharif, is threatening to quit the alliance unless a decision is taken on Friday to restore judges dismissed by Musharraf last year.

Another divisive issue is likely to be the question of the next president. Bhutto's Pakistan People's Party (PPP), which leads the coalition, is proposing her widower, Asif Ali Zardari.

"The majority of the party thinks that Asif Zardari should be president," said a Bhutto party spokeswoman, Farzana Raja, adding a decision on the party's candidate was expected on Friday.

Under the Constitution, a new President should be elected by members of provincial assemblies and the national Parliament within 30 days of Musharraf's resignation.

Pakistani stocks and the rupee strengthened on Monday and Tuesday on the news Musharraf had resigned.

But both started to weaken on Wednesday as instead a showdown loomed within the coalition over the judges. On Thursday stocks finished nearly 3 per cent lower and the rupee closed down by more than 2 per cent against the dollar.

Pakistan's stock market, which rose for six consecutive years to 2007, and was one of the best-performing markets in Asia in that period, has fallen about 27 per cent in 2008.

Investors said they were worried political turbulence would set off rating downgrades by Standard & Poor's and Moody's.

THREAT TO QUIT

A regional party based in the southern province of Sindh, Zardari's home region, has also said it wants to see Zardari take over as President. He has declined to say if he wants the job.

Sharif's party says it wants the next President to come from one of Pakistan's smaller provinces and for the nomination to be a ‘consensus candidate’.

The PPP and Sharif's party were bitter rivals during the 1990s when Bhutto and Sharif both served two terms as Prime Minister.

Thrown together by their opposition to Musharraf, differences between the two main parties will loom larger now that he has gone, analysts say.

With fighting in Afghanistan intensifying, pressure is also likely to build on Pakistan to act quickly to stop the Taliban launching attacks from sanctuaries in ethnic Pashtun areas on the Pakistani side of the border.

Pakistan also faces problems with attacks throughout the country, such as Thursday's at the ordnance plant.

A Pakistani Taliban spokesman said the blasts were retaliation for military operations against militants in the northwestern region of Bajaur, on the Afghan border.

"If it doesn't stop we will continue such attacks," Taliban spokesman Maulvi Omar said by telephone.

Sharif, in an interview with the Wall Street Journal, threatened to pull his party out of the ruling coalition if it failed to decide by Friday to reinstate the judges.

The PPP is reluctant to restore the judges because of concern the deposed chief justice might take up challenges to an amnesty from graft charges granted party leaders in 2007, analysts say.

Two small parties in the four-party alliance are trying to bridge the divide.