Market stabilises follow Bush bailout speech

Stock markets soared on both sides of the Atlantic today as optimism grew over the US Government's planned 700 billion US dollar (£380bn) banking bailout.

London's FTSE 100 Index surged to a record one-day rise last Friday when the plans to take toxic mortgage debts off banks' books were first mooted by US officials.

But the index has given back half of these gains amid uncertainty over the rescue - as well as a rough ride in Congress for US Treasury Secretary Henry Paulson from politicians who feared writing a "blank cheque" to pay for the actions of reckless Wall Street bankers.

President Bush last night warned of dire economic consequences without the bailout, and urged Democrats and Republicans to agree a bi-partisan deal.

The intervention stiffened hopes among investors of a deal, sending the Footsie and Wall Street's Down Jones Industrial Average to gains of 2 per cent.

There were gains for Financial stocks including Barclays, up 7%, Halifax Bank of Scotland up 2% and Royal Bank of Scotland which advanced 5 per cent.

Richard Hunter, head of equities at stockbroker Hargreaves Lansdown, said: "Now that the difficult Congress questions have passed, there is a feeling that this thing is going to go through - it is the only show in town at the moment.

"The nitty-gritty won't be seen for some time but the important thing is to get the markets into the position where they know it is going to happen."

Tim Hughes, head of sales trading at spread betting firm IG Index, added that a rescue could offer a boost in sentiment and act as a springboard for a "sustained push higher" by global stock markets.

He said: "Investors now seem more hopeful that a deal between the Fed and lawmakers can be agreed soon, giving the much-needed bailout plan a green light."