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WASHINGTON: Governments around the globe launched a multi-pronged attack on the finance crisis, as President George W. Bush and Treasury Secretary Henry Paulson prepared Tuesday to unveil the next step in the US response.
The announcements from Bush and Paulson are due a day after US stocks posted their largest one-day point gain ever, following their worst-ever week, and as government rescue packages sparked record gains worldwide Monday as hopes of recovery boosted the humbled banking sector.
Stocks reacted to trillion-dollar rescue packages in Europe, as governments worked in concert to stem the crisis.
Britain pumped 37 billion pounds into three struggling banks, which sent world stocks soaring.
And Australia's government on Tuesday unveiled a A$10.4-billion stimulus package to counter a slowdown and boost consumer spending.
Japan also announced measures Tuesday aimed at stabilising the ailing stock market, including a loosening of restrictions on companies buying back their own shares.
The move helped fuel a powerful rally on the Tokyo stock market, which soared more than 13 per cent in early trade.
Asian markets across the board also cheered the world wide rescue measures, posting high gains in early trade.
Seoul’s Kospi index climbed 5.14 per cent, or 66.19 points to 1354.72, S&P/ASX 200 in Sydney increased 4.51 per cent to 4369.10 and Wellington’s NZSX-50 surged 6.7 per cent, or 186.47 points to 2968.86.
Hong Kong’s bench mark Hang Seng index was up 4.23 per cent, gaining 689.48 points to post 17001.64, Shanghai edged up 1.43 per cent to 2103.21 while Taipei’s weighted index jumped 5.53 per cent, or 277.48 points to 5297.92.
Singapore’s blue chip Straits Times Index grew 5.61 per cent, or 116.53 points to 2192.88, Kuala Lumpur’s Composite added 2.0 per cent and Manila expanded 6.9 per cent to 2265.02.
Frenetic meetings by world powers in Washington over the weekend, where finance chiefs pledged to protect the financial system and work together, had helped restore confidence, dealers said.
"The market was encouraged by financial news on a number of fronts," said Al Goldman, an analyst at US brokerage Wachovia Securities.
The rescue package announced by Germany alone included 400 billion euros (US$545 billion) in loan guarantees and 80 billion euros in fresh capital, while France said it would guarantee up to 320 billion euros (US$436 billion) of lending between banks.
On Wall Street Monday, the leading Dow Jones Industrial Average closed with a gain of some 11 per cent, while London's FTSE 100 index of leading shares jumped 8.26 per cent.
Markets in Paris and Frankfurt posted gains of more than 10 per cent, while the Saudi market, the largest in the Arab world, closed up 9.5 per cent.
"We have had our first significant bounce in the markets for some time now," City Index market strategist Joshua Raymond said in London.
But "it's a dangerous time to start believing we have hit a bottom in the markets," he warned.
Over the weekend, finance ministers from G7 rich countries and G20 emerging powers held emergency meetings in Washington in a bid to find a solution to the financial crisis.
The International Monetary Fund head had issued a chilling warning on Saturday that global financial system had been brought "to the brink of systemic meltdown."
In Washington on Monday, Bush vowed to pursue "responsible, decisive action to restore credit and stability and return to vigorous growth" as he met Italian Prime Minister Silvio Berlusconi.
On Tuesday Bush and Paulson are expected to unveil a plan for the US government to buy stakes worth US$250 billion in several banks, as part of the recent US$700-billion rescue package.
Neel Kashkari, the US Treasury's pointman on the massive bailout, said Washington was ready to buy equity in a "broad array" of financial institutions in a further bid to restore confidence.
"As with the other programmes, the equity purchase program will be voluntary and designed with attractive terms to encourage participation from healthy institutions," he added.
Speaker of the US House of Representatives Nancy Pelosi indicated Monday that more help from the US could be on the way, saying hearings would be held over the possibility of a stimulus package for US taxpayers worth around US$150 billion.
US economist Paul Krugman, who was awarded the Nobel Economics Prize on Monday, said he was "extremely terrified" by the crisis but his fears had been at least slightly allayed.
"I'm happier about it now than I was five days ago," said the Princeton University professor and New York Times columnist who has been a fierce critic of Bush's economic policy.
- AFP/yb
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