(STAR) Global stock markets soared yesterday after a punishing week as news of a possible US government plan to rescue banks from toxic mortgage debt brought hope of a letup in the world’s worst financial crisis in decades.

Hong Kong’s Hang Seng Index surged a stunning 9.6 percent to 19,327.73, while Japan’s Nikkei 225 average rose 3.8 percent to 11,920.86.

Europe exchanges, which had spent nearly all of this week drowning in declines, responded with ferocity to the possible plan, surging as battered bank stocks rebounded along with them.

The news of a likely US lifeline, along with new changes to short-selling in the US, Britain and Ireland, also helped push markets higher, analysts said.

As trading opened in Europe, Britain’s FTSE 100 jumped 8 percent to 5,268.70 and France’s CAC 40 shot up 6.5 percent. Germany’s DAX added 3.9 percent.

Wrapping up one of the most turbulent weeks in memory, Asian and European markets surged after an overnight rally on Wall Street, where the Dow Jones industrial average advanced 410.03, or 3.86 percent, to 11,019.69 – the biggest percent gain since October 2002.

Investors also took heart from word that the US government was seeking the power to rescue banks by buying distressed assets at the heart of the financial system turmoil.

Details of the plan were still being worked out, but US Treasury Secretary Henry Paulson emerged from a nighttime meeting on Capitol Hill to say he hoped to have a solution “aimed right at the heart of this problem.”

“It definitely gives investors a light at the end of the tunnel,” said Daniel McCormack, a strategist for Macquarie Securities in Hong Kong. “The solution is of such a magnitude that it could eventually fix the problems ... That’s hugely important at the moment because that’s what markets are focused on.”

The biggest bonus of a potential government fix is it could help the banking industry as a whole, said Scott Fullman, director of derivative investment strategy for New York-based institutional broker WJB Capital Group. Until now, the US government has selectively bailed out institutions that were the most vulnerable.

The news triggered a rally in US stock futures, suggesting Wall Street would advance Friday, too. Dow futures rose 245 points, or 2.2 percent, to 11,227, and S&P 500 futures climbed 39 points, or 3.2 percent, to 1,242.

“Bear markets are extremely sensitive, and this market on a scale of one to 10 is a 13,” Fullman said. “I don’t say any prudent money manager would say we’re out of the woods, but right in this moment it all seems positive and leading toward an upward move for the market going into Friday session.”

The dollar also rose, advancing to 107.42 yen, while the euro fell to $1.4211. That helped stocks of major exporters like Toyota Motor Corp. and Sony Corp.

In China, the Shanghai benchmark jumped 9.5 percent – its biggest gain ever – after the government eliminated a tax on share purchases and said it was buying shares in state-owned banks.

Bank of China, the country’s second-largest lender, surged 10 percent, the daily maximum limit. China Construction Bank also had gained 10 percent.

In Russia, the two main stock exchanges opened, then closed, then opened again amid wild price swings. MICEX, where most share trading takes place, was up 23.1 percent on the day, while the RTS rose 15.5 percent.

Asian markets, meanwhile, were helped by the Bank of Japan, which pumped another ¥2 trillion ($18.7 billion) into money markets, its seventh injection this week. The move followed Thursday’s coordinated effort by central banks around the world to keep the financial system liquid.

Europe’s central banks also offered up more cash to jittery banks on Friday, putting a combined $90 billion into money markets.

Word of a possible US bailout lifted Asian banks, which had tumbled earlier this week.

Macquarie Group Ltd., Australia’s biggest investment bank and securities firm, exploded almost 38 percent.

Shares of China’s biggest lender, Industrial & Commercial Bank of China Ltd, or ICBC, rose 16.2 percent in Hong Kong and 9.9 percent in Shanghai.

Japanese megabanks were up strongly, with the country’s leading bank, Mitsubishi UFJ Financial Group Inc., up 10.5 percent and Mizuho Financial Group adding 12.6 percent.

In South Korea, Korea Exchange Bank’s shares fell 10.3 percent after British bank HSBC Holdings PLC said it canceled an agreement to purchase a controlling stake in the company.

Oil prices rose in Asia. Light, sweet crude for October delivery gained $1.63 to $99.51 a barrel in electronic trading on the New York Mercantile Exchange.

Early yesterday, the US Securities and Exchange Commission took the dramatic step of temporarily banning the routine practice of betting against company stocks.

Another factor were moves by the European Central Bank, Swiss National Bank and Bank of England to offer up more cash yesterday. The three banks put a combined $90 billion into money markets in a lockstep move.

London’s FTSE jumped more than 7 percent, led higher by Lloyds TSB, which gained some 30 percent in trading only a day after sentiment about its financial strength hobbled its appeal.

The most dramatic gains were scored by Anglo-Irish Bank, a niche lender that had been heavily targeted by short-sellers in recent weeks, knocking two-thirds off its market capitalization.

Anglo-Irish stock value initially surged by an incredible 120 percent, then settled back, still up more than 35 percent. Allied Irish rose 19.7 percen, Bank of Ireland 28.3 percent, and Irish Life & Permanent 21.6 percent.

Irish regulators also banned short-selling on the stocks of the country’s four largest financials: Allied Irish Banks, Bank of Ireland, Irish Life & Permanent and Anglo-Irish Bank Corp. – AP


updated 2 hours, 56 minutes ago from MS-NBC News break & Associated Press: watch Treasury Sec Paulsen press conference on video:

WASHINGTON - The Bush administration sketched out an effort on Friday to confront the worst U.S. financial crisis in decades, describing a plan that could cost taxpayers hundreds of billions of dollars to buy up bad mortgages and other toxic debt that has unhinged Wall Street.

President George W. Bush, flanked by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, acknowledged that the program will put a "significant amount of taxpayers' money on the line."

The administration is asking Congress to give it sweeping new powers to execute the plan. Paulson said it "needs to be big enough to make a real difference and get to the heart of the problem."

Chief News Editor: Sol Jose Vanzi

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