Wall Street and London rocket after US bailout

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Major European markets all shot up by 3% to 5% as bank shares rocketed. The Dow Jones Industrial Average opened up well over 2% as the world's biggest names in investment banking made huge gains.

Citigroup and Bank of America jumped 9% while JPMorgan jumped 6% as traders took a more positive view of their exposure to the US mortgage market.

Shareholders in the two lenders will suffer a massive wipeout from the deal, leading to expectations of massive falls.

Both were suspended in New York ahead of trading this afternoon following a 63% crash in Freddie's Frankfurt-listed stock earlier.

A glitch in London meant there were no trading figures for UK shares but at the time of suspension this morning, Royal Bank of Scotland was up 13%, or 29p, at 248¾p, HBOS was up 13% or 36¼p at 311¾p and Barclays was 39½p higher at 356¾p.

Elsewhere, UBS and Japanese giant Mizuho rocketed more than 10%. Both are said to be heavily exposed to Freddie and Fanny debt.

Analysts said the bailout — the biggest in recent memory — would go some way to easing the crisis of confidence in the global banking system.

"This is the beginning of the end of the problem," said Lucy McDonald, chief investmnet officer of global equities at fund manager RCM. Others, however, cautioned against too much exuberance.

"The intervention is welcome but it is too early to say what its effects might be," said HBOS in a statement.

One banking analyst said: "This is good news, of course, but there is still a long way to go in this crisis.

"We will not see the market return to health overnight as there is still a lot to work through both in the UK and the US."

Another said; "This does not deal with the fundamental fact that banks are not going to be offering bigger mortgages if they still think house prices have further to fall."

One senior banker at a major lending bank added: "This is the deepest and most comprehensive intervention in the current financial crisis.

"But this dooes not mean the return of easy money and easy credit."