European and Asian stocks have risen on optimism that the White House and the Federal Reserve will steer the world's largest economy out of a recession.
Global stocks have risen on optimism that the White House and the Federal Reserve will steer the world's largest economy out of a recession.
A US plan to spend $150bn (£76bn) reviving its economy helped to send the UK's FTSE 100 index up 1%, while Germany's Dax index added 2.03%.
A US plan to spend $150bn (£76bn) reviving its economy helped to send all three US stock indexes higher, with the benchmark Dow Jones up 0.5%.
The move came days after US rates were cut to 3.5% from 4.25% and amid talk of a rescue plan for bond insurers.
Strong earnings from Microsoft and buildings equipment firm Caterpillar also helped to lift sentiment.
Earlier Asian stocks made gains, with Japan's Nikkei 225 closing up 4%.
The UK's FTSE 100 index rose 1%, while Germany's Dax index added 2%.
With millions of US consumers set to get tax rebates, the hope is that a US recession will be prevented and the risk of those problems spreading to other key global economies will be minimised.
The positive trend marks a stunning turnaround from the feeling at the beginning of the week.
On Monday, stock markets from Japan to the UK were heavily sold on growing fears that the US would fall into a recession and drag down other key economies too.
The US has done many things to stabilise the market but all the bad news is not yet out there Heinz-Gerd Sonnenschein, Postbank
The US has done many things to stabilise the market but all the bad news is not yet out there Heinz-Gerd Sonnenschein, Postbank
Relief at White House measures, in addition to the Fed cutting US interest rates by the biggest amount in two decades, overshadowed a massive fraud at French bank Societe General.
In many markets, the falls were the worst since the 11 September 2001 attacks on the US. The resulting turmoil prompted the Fed, the US central bank, to cut US rates to 3.5% from 4.25%.
A rogue trader has been accused of creating a loss of 4.9bn euros, but confidence in banks worldwide appeared to be unaffected.
This failed to prompt a rebound by itself, with many observers taking the view that the Fed's bold move had come too late.
Shares in Societe General rose 1.3% earlier after a sell-off on Thursday.
But after the speedy implementation of the White House economic measures and talks of a rescue plan for bond insurers, which are at the heart of the whole financial system, the outcome was an end-of-week relief rally.
An upbeat trading forecast from L'Oreal, the world's biggest beauty group, also helped to calm nerves after a number of recent profit warnings and signs of weakness in business sentiment.
The Dow Jones gained 0.5% to reach 12,440, while the technology-heavy Nasdaq and S&P also rose.
Earlier, Asian stocks made larger gains, with Japan's Nikkei 225 closing up 4%.
The discovery of a massive fraud at French bank Societe General was largely ignored and confidence in banks worldwide appeared to be unaffected.
Market moves
Market moves
London's FTSE 100 rose 62.8 points, more than 1%, to trade at 5,938, making a full recovery from the steep losses it suffered on Monday and Tuesday.
London's FTSE 100 rose 62.8 points, more than 1%, to trade at 5,938, making a full recovery from the steep losses it suffered on Monday and Tuesday.
Germany's benchmark Dax index rose more than 2% to 6,959.45, while in France the Cac 40 climbed 1.37% to 4,982.58.
Germany's benchmark Dax index rose more than 2% to 6,959.45, while in France, the Cac 40 climbed 1.37% to 4,982.58.
But analysts expected more volatility in the short term.
But analysts expected more volatility in the short term.
"We expect sharp gains and losses in the next few days and weeks," said Heinz-Gerd Sonnenschein, a strategist at Postbank in Germany.
"We expect sharp gains and losses in the next few days and weeks," said Heinz-Gerd Sonnenschein, a strategist at Postbank in Germany.
"The US has done many things to stabilise the market but all the bad news is not yet out there."
"The US has done many things to stabilise the market, but all the bad news is not yet out there."
Investors will be watching closely how shares perform on Wall Street for further direction.
Stimulus measures
Stimulus measures
On Thursday, the White House and the Democrats in Congress agreed a package of measures to boost economic growth in the US, where fears of a recession have risen.
On Thursday, the White House and the Democrats in Congress agreed a package of measures to boost economic growth in the US, where fears of a recession have risen.
This included a tax rebate to some 117 million US homes of up to $600 for individuals and up to $1,200 for married couples.
This included a tax rebate to some 117 million US homes of up to $600 for individuals and up to $1,200 for married couples.
House of Representatives Speaker Nancy Pelosi said Congress would act on the deal "at the earliest date, so those rebate cheques will be in the mail".
House of Representatives Speaker Nancy Pelosi said Congress would act on the deal "at the earliest date, so those rebate cheques will be in the mail".
The tax rebates for households should total $100bn, while businesses will benefit from up to $50bn of tax cuts.
The tax rebates for households should total $100bn, while businesses will benefit from up to $50bn of tax cuts.
"Because the country needs this boost to the economy now, I urge the House and the Senate to enact this economic growth agreement into law as soon as possible," said President George W Bush.
"Because the country needs this boost to the economy now, I urge the House and the Senate to enact this economic growth agreement into law as soon as possible," said President George W Bush.
Asia boost
Asia boost
Many Asian economies are still closely tied to US demand for their exports despite the development of China as a major importer.
Many Asian economies are still closely tied to US demand for their exports, despite the emergence of China as a major importer.
So fresh hopes that the US consumer will carry on spending lifted shares across the board from financial firms to carmakers and technology stocks.
So fresh hopes that the US consumer will carry on spending lifted shares across the board, from financial firms to carmakers and technology stocks.
The benchmark index in Hong Kong, the Hang Seng, closed up 6.7% at 25,122.37, while Japan's Nikkei 225 rose 4% to end at 13,629.2.
The benchmark index in Hong Kong, the Hang Seng, closed up 6.7% at 25,122.37, while Japan's Nikkei 225 rose 4% to end at 13,629.2.
Stock markets in South Korea, Taiwan, the Philippines and Australia also rose.
Stock markets in South Korea, Taiwan, the Philippines and Australia also rose.
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