With the UK’s Chancellor pumping £20 billion into the UK economy with a VAT rate cut of 2.5% and the US Treasury bailing out Citibank in America with a $20 billion share investment in the troubled bank, world stock markets have soared.

The Uk’s FTSE 100 jupmed by 9.84%, which is the highest jump it has seen in its history, European shares rallied too with the German Dax rising by 10.34% and the French Cac 40 posting a 10.09% gain. The Dow has risen by just under 5% today, but had posted a large gain of over 5% on Friday of last week on the news of the Citibank investment, after European markets had closed.

London’s index of key shares, the FTSE 100, has closed in “bear market” territory after another tough day for shares in Europe and the US.

The FTSE 100 lost 145 points, or 2.7%, to end at 5,261.6 points. A bear market is often defined as a 20% fall from a stock index’s recent peak.

Friday’s closing price is more than 20% below its June 2007 peak of 6,732.

Markets have struggled amid concerns about the world economy and the impact of slower growth on company earnings.

“The movement this afternoon was a clear indication that we haven’t reached the bottom and the bears are still fully in control,” said Angus Campbell, head of sales at Capital Spreads in London.

Banks hit

High oil prices, which hit a fresh record above $147 a barrel earlier on Friday, have also undermined investor confidence.

In Paris, the Cac 40 share index ended the day down 3.1% at 4,100.64 points, while in Frankfurt the Dax finished 2.4% lower at 6,153.30.

On Wall Street, the blue-chip Dow Jones index ended down 1.14% at 11,100.54 points on heightened fears over the financial health of the nation’s two largest mortgage firms.

Shares in Fannie Mae and Freddie Mac ended down 22% and 3% respectively in volatile trading, with both counters plunging as much as 50% shortly after the open.

In London, banks were among the biggest losers, with Royal Bank of Scotland down 8.5%, Standard Chartered sliding 7.8%, and HBOS shedding 1.8%.

News reported by BBC