The stock market staged a spectacular "freaky Friday" comeback today to end the most tumultuous week in the City for 80 years.

Shares gained more than £92 billion in value as the "rocket-fuelled" recovery propelled the FTSE-100 to its biggest one-day rise. By lunchtime, the blue chip index was up 389.3 points at 5269.3, a surge of eight per cent, breaking the previous 7.9 per cent record dating back to October 1987 in the aftermath of Black Monday.

There has been no bigger rise since the FTSE-100 was launched in 1984 and its strength caught traders by surprise. Bank shares led the charge, with some rising by up to 90 per cent in chaotic early trading. RBS was the most spectacular,, up 69.45p or 43 per cent to 231.25p. HBOS, the biggest British victim of the carnage in the world's banking system, was 67.65p up at 240.25, adding 39 per cent to its value. Traders were in a state of nervous exhaustion after an unprecedented five days of volatility, starting with the collapse of Lehman Brothers and ending with a $2 trillion bailout of the global banking system.

Some doubted whether today's relief from the worst effects of the credit crunch would prove longlasting and said the rally was nothing more than a "freaky Friday" bounce.

Mark Priest, senior trader at brokers ETX Capital, said: "This is a rocket-fuelled rise in the market, but it may only be temporary and I expect one to two years of troubled times ahead. Like a large interest rate cut, this has caused a spike in the market, which is great in the short term, especially for the banks. But I question whether it can last."

One worrying sign was that interest rates in the three-month interbank lending market stayed stubbornly high at 6 per cent, a full percentage point above the official Bank of England base rate.

The unprecedented rally came after a concerted action by governments around the world to restore a measure of confidence to the nerve-shredded financial markets, particularly the banking system.

The most significant move came last night when US Treasury Secretary Hank Paulson revealed he had a plan to rescue banks from the "toxic" sub-prime mortgage assets that have led to the crisis.

But other initiatives included temporary bans on short-selling of bank shares in the City and on Wall Street and a $180 billion injection of funds into the money markets by six central banks yesterday.

Matt Buckland, a dealer at CMC Markets, said central government intervention had boosted markets worldwide.

He said: "The combined efforts are so great that there seems to be a coherent belief that this could actually be sufficient to draw a line under what has been a tumultuous 18 months for the markets."

David Buik of brokers BGC Partners said: "This week has been fearful and enigmatic. But you do feel that there is a way of digging ourselves out of the jam in a relatively short space of time."

Gordon Brown today hinted at further action to tackle the banking crisis.

He pledged: "We will do everything in our power to ensure the stability of the system." He said further measures were being considered in talks with America and the EU.

"We are now working with our international partners about broader intervention we are in a position to take," the Prime Minister said, after talks at No 10 with the Georgian premier.

"Everything we are doing is designed to ensure that there is investor confidence in the future and to bring back stability into the system."

He spoke to Nicolas Sarkozy of France, who is currently president of the European Union, while Chancellor Alistair Darling held talks with Mr Paulson.

He hailed the embargo on short-selling speculators as "decisive action" to clean up the system.

Today's rally in London followed the biggest rise in shares on Wall Street for six years. The Dow rose almost 4 per cent, or 410 points, to 11019.6 after details emerged of the plan to isolate the toxic mortgage debt at the heart of the global meltdown.

Mr Paulson and Federal Reserve chairman Ben Bernanke said they would work through the weekend to flesh out the plan. It would enable banks and other financial institutions to offload the illiquid mortgage-related assets. Banks around the world have already written off $518 billion worth and it is thought that the total cost could reach $2 trillion.

The main European markets joined in the rally. By lunchtime the French CAC 40 Index was up 7.28 per cent while Frankfurt's DAX index was 4.73 per cent higher.

To add to the general sense of relief there was even good news from the high street with John Lewis reporting a 7.5 per cent rise in department store sales this week compared with last year. Sales at the flagship Oxford Street store were up 16.9 per cent.

There was continued uncertainty at Lehman Brothers for staff. Normal pay day passed without them receiving their September salaries. But the crippled investment bank's 4,500 UK staff were told that the payments, which total $150 million (£83 million) would be made by the end of the month.

One investment banker, who asked not to be named, said: "I checked today but the money has not gone in, as we thought. We have been promised we will get paid, but they said it could take longer because of what has happened. They told us it should be with us before 30 September."

The bank has suffered difficulty in paying the September wage bill because of $5 billion transferred from London to the US headquarters on Friday in line with the bank's normal practice. However, Lehman Brothers put itself into Chapter 11 protection on Sunday night and all assets were frozen so the normal transfer of money back to London could not take place. But many insiders believe the timing of the announcement was deliberate.

One senior source said: "Most of the 4,500 London employees of Lehmans have no idea that we might have been sold down the river by our New York colleagues but those who do know are extremely upset. It's like we've been stabbed in the back."

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