Markets react to US bank recapitalisation announcement

Early gains on the FTSE were largely cancelled out later in the afternoon, after the US followed Britain''s lead in announcing bank recapitalisations.

A speech from George W Bush detailed a £143 billion scheme to buy up shares in financial firms – providing them with strong backing against the continuing economic downturn.

Mr Bush said: "This is an essential short-term measure to ensure the viability of America''s banking system."

The FTSE closed 119 points, or 2.79 per cent up at 4375.63 – after gaining as much as six per cent this morning.

This morning, Japan''s Nikkei 225 enjoyed its biggest-ever one-day percentage rise, putting on over 14 per cent after being closed yesterday for a national holiday.

The Dow Jones in New York was 74 points, or 0.8 per cent up at 16:34 BST.

Earlier in the day, analysts expressed the hope that the bank share purchases could help to relieve the pressure on the financial system.

"The efforts are moving in the right direction to avoid systemic risk, restore confidence and open the credit markets," Chicuong Dang, KBL Richelieu Gestion analyst, told Bloomberg.