Global stocks in record rally

Global stocks surged to record single-day gains yesterday, bouncing off five-year lows, while oil prices rose, after governments in Europe took bold steps to quell the global financial crisis and avert a deep recession.

US stocks posted their largest one-day percentage rise ever, with all three major indices rising more than 11 per cent, while a key European index surged by a record 10 per cent.

The Dow Jones industrial average closed up 936.42 points, or 11.08 per cent, at 9,387.61. The Standard & Poor's 500 Index surged 104.13 points, or 11.58 per cent, at 1,003.35. The Nasdaq Composite Index advanced 194.74 points, or 11.81 per cent, at 1,844.25.

Crude oil prices jumped more than four per cent along with other commodities, and eurozone government debt prices fell as the European banking system rescue, designed to shake a global credit crunch out of a deep freeze, removed a flight-to-safety bid.

The jump in US equities erased the previous one-day record of more than 5.73 per cent seen in the benchmark S&P 500, two days after the Black Monday crash of October 1987.

The US Treasury market for government debt was closed for the Columbus Day holiday.

Britain, Germany, France, Italy and other European governments pledged hundreds of billions of dollars to recapitalize ailing banks and boost flagging confidence in the world's wobbly financial system.

The US Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank also said they would lend commercial banks as much US dollar liquidity as they needed at fixed rates to restart interbank lending.

In the US, Treasury Secretary Henry Paulson said Washington was developing plans to buy equity in financial institutions to halt the prolonged market turmoil.

British Prime Minister Gordon Brown shifted the world's thinking by proposing to inject new capital into banks to get them lending again.

The US has since moved closer to the positions of European leaders, who were in Washington over the weekend for meetings of the Group of Seven major economies, the International Monetary Fund and the World Bank.

Mr Brown also called on world leaders to create a new financial architecture to update the current international economic system, which was set up at a conference in Bretton Woods, New Hampshire, in 1944.

"Sometimes it does take a crisis for people to agree that what is obvious and should have been done years ago can no longer be postponed," Mr Brown said in a speech at the London offices of Thomson Reuters.

Britain's bank plan called for £37 billion ($64 billion) of taxpayers' cash to bail out three major banks in a move that would likely make the government their main shareholder.

Germany, France, Italy and other European governments also announced rescue packages totalling hundreds of billions of dollars that were designed to combat the banking crisis, the worst since the Great Depression.

Jack Ablin, chief investment officer at Harris Private Bank in Chicago, said with luck the European measures will make edgy investors think long-term instead of fret hour-by-hour.

"Sometime last week it seemed like we faced Armageddon, so to have a coordinated plan on stabilizing banks is huge progress," Ablin said. But "it's clearly an oversold bounce."

MSCI's all country world index surged 9.37 per cent, its biggest one-day percentage gain in at least two decades.

Battered financial stocks were among the biggest gainers on both sides of the Atlantic.

Morgan Stanley vaulted 87 per cent after Japan's Mitsubishi UFJ Financial Group said it would go ahead with its plan to pay $9 billion for a 21 per cent stake in the former investment bank, now a bank holding company.