Many of the world's biggest stock markets rallied Monday after last week's historic sell-off as governments in Europe and beyond intensified efforts to stabilize the world's troubled financial system.
In London, as British Prime Minister Gordon Brown and his treasury chief gave a news conference to explain their government's freshly announced $63 billion cash infusion for some of the country's biggest banks, the FTSE 100 group of prime stocks shot up almost 250 points, or six percent.
The rest of Europe's exchanges also bounced back to life Monday after leaders of the 15 euro-zone countries unveiled measures Sunday to prop up the region's ailing financial institutions.
Germany's DAX was up more than six percent to 278 points in early trading. In Paris, the CAC was trading almost seven percent higher.
Under the European plan, governments guaranteed new bank debt until the end of 2009, allowed governments to help banks by buying preferred shares, and vowed to rescue important failing banks through emergency recapitalization.
Europe's leaders have rarely agreed on so much, so fast, reported CBS News correspondent Elizabeth Palmer, but after meeting for only four hours, they emerged Sunday with a plan to tackle the crisis.
Also helping to restore confidence was the announcement Monday by five central banks, including the Federal Reserve and the European Central Bank, of new measures aimed at thawing frozen credit markets and bolstering funding to banks.
The Bank of England, the European Central Bank and the Swiss National Bank said in a joint statement they would provide unlimited short-term U.S. dollar funds to financial institutions through tenders at seven-day, 28-day and 84-day maturities at fixed interest rates.
To accommodate the operations, the Federal Reserve said it would increase the sizes of its temporary currency swap facilities "so that these central banks can provide U.S. dollar funding in quantities sufficient to meet demand."
The swap arrangements have been authorized through April 30, the Fed said. The Bank of Japan said it is considering similar measures.
The action we are taking today is unprecedented but essential to all of us.
British Prime Minister Gordon Brown
In Britain, the Royal Bank of Scotland Group PLC said it would raise $34 billion worth of capital, with the government buying $8.6 billion of preference shares directly and underwriting $25.7 billion of ordinary shares.-
"The action we are taking today is unprecedented but essential to all of us," Brown said at the news conference in London. "The government cannot just leave people on their own to be buffeted about," he said. "We must in an uncertain and unstable world be the rock of stability upon which people can depend."
The government was to inject another $29.2 billion into Lloyds TSB Group PLC and HBOS PLC, two banks that are in the process of merging, the banks said
Lloyds and HBOS also said the terms of their merger would be altered so that Lloyds would pay less for HBOS than what was previously agreed.
The announcements led to the first high-level shuffling of management in the banking crisis, with RBS's chief executive Fred Goodwin resigning his position, to be replaced by Stephen Hester, currently chief executive of British Land. It was also announced that Chairman Tom McKillop would be retiring at the group's annual meeting in April. And RBS' chairman of global markets, Johnny Cameron, was to leave the board immediately.
Hong Kong's Hang Seng Index, which tumbled more than 7 percent Friday, rose about 478.80 points higher, or 3.24 percent, at 15,275.67.
In Australia, the S&P/ASX200 index was up 4.71 percent in response to a government plan to guarantee bank and other lender deposits for three years. The benchmark plunged over 8 percent on Friday, its biggest single-day fall ever.
South Korea's benchmark gained 2.8 percent and Singapore's key stock measure was up 2 percent. But indices in Shanghai and the Taiwan benchmark lost more than 3 percent.
Japan's market, where the Nikkei 225 tanked nearly 10 percent Friday to close out its worst week in history, was closed for a public holiday.
In the U.S., investors were waiting to see if the Treasury Department's newly announced plan to buy equity in troubled banks would help stabilize the volatility on Wall Street. Lawmakers have urged quick action by President Bush on the effort, to be funded by the $700 billion bailout he signed Oct. 3.
CBS News correspondent Talia Assuras reported that experts say the process of purchasing bank stocks is much faster and more efficient than just buying up the bad debt. And speed is of the essence.
"If you buy preferred shares you can put the money in quickly," says economist Peter Morici. "You leave the process of working out the loans to the banks and, frankly, they understand that much better than the government of anyone the government would hire in New York City to do it."
"We did this during the Great Depression," Morici continues. "We are in that kind of crisis. So in my mind we should first of all recognize that the government is not nationalizing the banks and, second of all, that this is a required step to unlock credit markets."
Investors were still highly cautious, though, worried about eroding economic conditions, shrinking company earnings and further market turmoil, analysts said. There could be more selling ahead if individual investors, spooked by the steep declines in stock prices, continue to yank money from mutual funds and asset managers.
"You have a situation of global forces selling, which is outweighing optimism about political endeavors at the moment," said Benjamin Collett, head of hedge fund sales trading Daiwa Securities SMBC Co. in Hong Kong. "You have to assume that we're going to go lower, that the risk is to the downside."
Wall Street futures indicated a sharp rebound is in store for the major indexes ahead of the opening bell on Monday. Dow Jones industrials futures rose 235 points, or 2.8 percent, to 8,605. Nasdaq 100 futures rose 38.5, or 3 percent, to 1,321.00; and Standard & Poor's 500 futures added 31.8, or 3.5 percent, to 922.80.
In a volatile session Friday in New York, the Dow Jones industrial average fell 128, or 1.49 percent, to 8,451.49, gyrating within a 1,000 point range. The average had its worst week on record in both point and percentage terms.
Elsewhere in Asia, Indonesia's key index was down 3.7 percent Monday after the lifting of a trading suspension, imposed last Wednesday amid a freefall in share prices. Investors seemed little encouraged by government measures to free up liquidity, including easing regulations for share buybacks and corporate financial reserve limits.
Oil prices rebounded, with light, sweet crude for November delivery up $2.04 at $79.74. The contract fell Friday $8.89 to $77.70, the lowest price since Sept. 10, 2007.
Photo: A trader signals during slow trading at the Philippine Stocks Exchange at Manila's financial district of Makati, Oct. 13, 2008. (AP Photo/Bullit Marquez)
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The action we are taking today is unprecedented but essential to all of us.
