Leading US shares have surged, boosted by a report that the US government might announce a new plan that would help tackle the financial crisis.

The leading Dow Jones Industrial Average added more than 400 points, or 3.86%, to 11,019.69, a rise of 560 points from its low of the day.

Treasury Secretary Henry Paulson was looking to create a repository for bad bank debt, CNBC reported.

World markets have been volatile in the wake of huge upheavals among banks.

Since the start of the week, Lehman Brothers has collapsed, the Federal Reserve has bailed out insurance giant AIG, Merrill Lynch has been acquired by Bank of America and in the UK, Lloyds TSB has acquired HBOS.

US investors were boosted on Thursday by the hope of a broad-reaching federal intervention that might lead to the creation of an entity to take on the bad debt that has hit finance firms.

Only a day earlier the Dow Jones index had fallen by more than 4%.

CNBC said that Mr Paulson was looking into setting up something akin to the Resolution Trust Corp, which was formed after savings and loans banks collapsed in the 1980s.

The past few days have seen a number of dramatic developments on financial markets. Thursday’s key events include:

– Central banks from the UK, US, Europe, Canada, Switzerland and Japan are releasing $180bn into their money markets. The move is the fourth such concerted effort since the onset of the credit crisis last year.
– The news helped to reduce the interest rate at which banks lend to each other – a key factor behind the problems in credit markets.
– Cautious investors are looking for safer places to put their money. The price of gold, regarded as a haven in troubled times, rose to $871.2 an ounce after recording its biggest one-day gain in history on Wednesday.
– Lloyds TSB released details of its £12.2bn takeover of HBOS. The deal values HBOS shares at 232p each and is expected to lead to cost savings of £1bn a year and could also result in significant job losses.
– Russia’s main stock exchange suspended trading for a second consecutive day as the government tried to halt a sharp fall in share prices and restore confidence in the economy.
– The UK’s Financial Services Authority has announced steps to restrict short-selling of shares while New York’s attorney general has launched a probe into short-selling.

Bush concern

Earlier on Thursday, European markets had been mixed.

The Paris Cac shed 1.06% to end at 3957.86 and London’s FTSE 100 ended 0.6% lower at 4880. In Frankfurt, the Dax closed 0.04% up, at 5863.42.

Bush seeks to reassure markets

US President George W Bush said he was closely monitoring the situation on financial markets and the recent actions taken by the Federal Reserve and other regulators were “necessary and important”.

“We will continue to act to strengthen and stabilise our financial markets and improve investor confidence,” he said.

Banks take action

Earlier on Thursday six of the world’s top central banks took steps to calm worried stock markets, releasing $180bn (£99bn) to lift the amount of credit available.

“The credit crunch is creating a new world order in banking and finance” Robert Peston, BBC business editor

While the move was viewed positively, there were concerns the impact would be short-lived.

“Markets know that central banks don’t own a magic bullet, otherwise they would have used it already,” Sean Callow, currency strategist at investment firm Westpac.

“And we’ve seen these sorts of steps before; it only addresses one of the symptoms of the underlying crisis.”

In Asia, Hong Kong ended flat at 17,632.5 after earlier falling by 7% as fears of more company failures gripped investors.

Tokyo’s Nikkei share index ended 2% lower. Share indexes in Shanghai, Taiwan and India fell by between 3 and 5%.

News reported by The BBC

Global stock markets have suffered a sell-off sparked by concerns about the global economy and crude oil prices which have hit a new record.

New York’s Dow Jones closed down 0.93%, or 106.9 points, at 11,346.51 as the cost of oil rose to a fresh high above $142 a barrel.

Losses were mirrored across the Atlantic, as share indexes in Paris and Frankfurt ended about 0.6% lower.

But London’s FTSE shrugged off earlier losses to register a 0.2% rise.

Stock markets across Asia fell – earlier China’s benchmark Shanghai index dropped by 5.3%, while India’s Sensex index declined by 4.3%.

Indexes in Japan, Taiwan and South Korea all shed more than 2%.

Crude oil surged to a record, as Brent crude jumped to $142.13 a barrel, while New York light crude climbed as high as $142.26, on concerns about supply.

The global stock market downturn began in New York on Thursday, when the Dow fell more than 3% to a two-year low.

The fear on Wall Street is that rising prices and tighter finances will force Americans to curb spending and push the economy into recession.

Consumer concerns

Traders brushed aside positive news about US consumers on Friday.

The US economic stimulus package, which will hand out $107bn to Americans this year, boosted household budgets and helped consumer spending rise 0.8% last month.

But analysts are not convinced May’s feelgood factor will last.

“We have had very strong consumer spending, but most of the tax rebates went into savings, which might mean they are going to stay there,” said Pierre Ellis, an economist at Decision Economics in NewYork.

Investors also reacted to a string of bad news about key sectors of the US economy, while worries remain about the credit crunch and sub-prime fallout.

News reported by BBC