Bail-out sparks bounceback for FTSE

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The FTSE 100 Index opened 54.1 points up at 5079.7 - a gain of 1%.

It follows near 4% falls on both Monday and Tuesday as markets were rocked by the collapse of Lehman Brothers and fears over AIG's position.

Halifax Bank of Scotland, which has been the UK's worst-hit blue chip stock amid the turmoil and fears about its funding costs, rose 7%. And Barclays, which confirmed that it was buying some Lehman Brothers assets including its North American investment banking business, increased 7%.

The Footsie's opening surge follows a 1.3% rise for Wall Street's leading share index on Tuesday night, and similar gains for Asia's main stock markets in Japan and Hong Kong overnight. They came after the Fed's huge rescue package for AIG, which is the US's biggest insurer as well as the shirt sponsor of Manchester United Football Club.

US regulators said a "disorderly failure" of AIG could undermine already fragile financial markets. The US government will receive a 79.9% equity stake in AIG as part of the rescue deal.

Sentiment in London also looks to have been buoyed by Barclays' agreement to buy up some of Lehman's US operations and assets.

The third-biggest bank in the UK withdrew talks with Lehman Brothers about a possible outright acquisition at the weekend.

But it has now agreed to buy Lehman's North American banking operations, which include Lehman's fixed income and equities sales, trading and research and investment banking business, for 250 million dollars (£138.9 million) in cash. About 10,000 employees work in the divisions. The bank is also buying Lehman's New York headquarters and its two data centres in New Jersey for 1.5 billion dollars (£830 million).

London's Footsie briefly dropped below the 5,000 mark for the first time since June 2005 on Tuesday, before recovering some ground to close at 5025.6 points amid late session hopes of an AIG rescue.