Global stocks soared for a second day today and crude oil prices shot up, after Washington joined European plans to pump billions of dollars into banks in a concerted effort to turn back a worldwide financial crisis.

The Dow Jones Industrial Average surged 4.07 per cent to 9,769.84 in the first five minutes, a day after the biggest single-day point gain for blue chips and best percentage rally in 75 years, although it slipped back after that. The tech-heavy Nasdaq was up 2.52 per cent at 1,890.65 at mid-day.

Market action came as President Bush confirmed a massive rescue for the ailing banking system with a plan to inject up to $250 billion in capital into banks and offer new guarantees to help to restore credit flows. The plan mirrored a scheme announced by Gordon Brown last week and adopted elsewhere in Europe.

"Last week's selling panic has been supplanted for the time being with a buying panic, with participants fearing they are missing out on the big rally," said Patrick O’Hare at Briefing.com.

Earlier, Tokyo closed up by a record 14.15 per cent as Japan unveiled fresh market-stabilising measures. The Bank of Japan said that in a bid to spur lending and thus ease a credit squeeze it was offering banks unlimited dollar funds at a fixed rate against appropriate collateral — a move that followed the lead of three central banks in Europe announced yesterday.

Banks worldwide need the US currency to finance operations but the market on which they would normally borrow it has seized up amid extreme tension that erupted when the US subprime mortgage market collapsed over a year ago.

In London, the benchmark FTSE 100 index was up 3.54 per cent in late trading while its main European rivals had also risen. The FTSE closed more than 8 per cent higher yesterday as the Government pumped £37 billion into the partial nationalisation of RBS and HBoS-Lloyds TSB.

"It’s far too early to say whether the key aspects of trust and confidence have returned to the markets, but it does appear as though we have turned a corner," said Martin Slaney, GFT head of derivatives.

"Another historic day for Wall Street is symbolic of the waves of relief you can feel rippling through the markets as a result of the multilateral rescue action."

This afternoon, the Paris CAC 40 index had gained 2.26 per cent, a day after rising more than 11 per cent, its largest ever one-day gain. Frankfurt was 4.14 per cent higher.

European leaders yesterday unlocked more than one trillion euros in rescue funds for the troubled banking sector, pledging to plough capital into the hardest-hit banks and massively underwrite loans between financial players.

"The battle may not be won yet but the auguries are encouraging," said Justin Urquhart Stewart, an analyst at Seven Investment Management. "However, don’t be fooled: the enemy is not yet beaten and the war not won. This will continue for some months yet."

The emergency steps sparked hopes of an easing of the credit market gridlock that has shaken confidence in the international financial system and sparked fears of a global recession.

Hong Kong shares closed up 3.2 per cent, Singapore up 2.5 per cent, Seoul up 6.1 per cent and Sydney up 3.7 per cent.

But Iceland’s stock exchange plummeted more than 70 per cent when it resumed trading this morning after a three-day break, although the index later recouped almost all those losses. Officials said that the plunge was a statistical anomaly caused by the ongoing suspension in trading of financial firms.

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