The London stock market has rebounded sharply after a proposed US government plan to buy billions of dollars of US banks' bad mortgage-related loans.
The dramatic move pushed the UK's FTSE 100 index up more than 8%.
Financial stocks gained the most, with Royal Bank of Scotland ECB to inject 70 billion into money market ...
Economy worries hit world markets ...
Global stocks battered by renewed credit fears, oil surge ... and HBOS up more than 50% at one point.
Moves to restrict short-selling in the US and UK also helped to reverse steep losses from earlier in the week, with stock markets worldwide bouncing back.
See graph of the FTSE 100 this week
Crisis of confidence
The proposed US government rescue plan comes at the end of a week of almost unprecedented turmoil on world financial markets amid a crisis of confidence in banks:
- US Wall Street giants Morgan Stanley and Goldman Sachs are the latest to have their shares punished by nervous investors amid concerns for their financial health
- Central banks around the world have pumped billions of dollars of extra funding into money markets to ease the liquidity crisis
- The UK's City watchdog announced a crackdown on short-selling - thought to be a contributor to the share price falls in UK banks in recent days.
- The US financial regulator the Securities and Exchange Commission followed suit on Friday, banning short-selling in the stock of 799 financial companies until 2 October
- Stock markets in Russia have been suspended for the second time on Friday at the end of a week of wild swings and stop-go trading
Dramatic measures
After a meeting with Congress members late on Thursday, US Treasury Secretary Henry Paulson announced plans to introduce new laws to buy hundreds of billions of dollars of bad debt from banks.
This, he said, was at the heart of the almost unprecedented malfunction of the banking system, which has caused havoc in world stock markets this week.
In addition, the UK City watchdog the Financial Services Authority and its counterpart in the US have moved to crack down on short-selling - a practice thought to have contributed to the steep share price falls this week.
Short-selling occurs when a trader borrows shares from another to sell them, then buy them back at a lower price, thereby profiting from the difference.
Market moves
The UK's FTSE 100 index of largest shares added more than 8% with banking stocks among the biggest gainers.
Halifax owner HBOS, which was forced into the arms of rival Lloyds TSB after its shares slumped this week, traded up 63 pence at 240p.
France's Cac 40 and Germany's Dax indexes joined in the rally, up 6.5% and 4% before midday.
Earlier, Japan's Nikkei jumped 3.8%, while the Shanghai Composite recovered from 22-month lows to close up 9.5% and Hong Kong's Hang Seng soared almost 10%.
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(BBC)
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