Intervention prompts market rally
Rates cuts and rescue plans encourage a rebound in US and European stocks.
On Wednesday, the British government unveiled a plan which involved taking stakes in its banks in return for bailing them out.
Asked whether he would try something similar to the British bailout, Paulson said: “We have a broad range of authorities and tools… We’ve emphasised the purchase of liquid assets, but we have a broad range of authorities.
“And I’m confident we have the authorities we need to work with going forward.”
A US administration official, who spoke on condition of anonymity because no
decision had been made, said on Thursday that Washington’s $700bn rescue package allowed the US treasury department to inject fresh capital into financial institutions and get ownership shares in return.
Banks up
In Europe, British bank HBOS led the rise in financial shares, with a 29 per cent jump, while Royal Bank of Scotland gained 14 per cent and Lloyds TSB was up seven per cent.
Shares in Dexia, a Franco-Belgian bank, jumped 24 per cent after France, Belgium and Luxembourg announced they had agreed to provide state guarantees for efforts by the troubled financial group to borrow.
The move was the latest in a series of attempts by governments across the world to stabilise a tottering financial sector, which have included bailout packages in the United States and the UK and the rescue of Fortis in Belgium.
South Korea, Hong Kong and Taiwan on Thursday followed the US Federal Reserve and central banks from Europe, Canada and China in cutting interest rates to contain the market meltdown.
While the Irish government said it would extend its guarantee of bank deposits to cover those in Irish branches of five foreign-owned institutions.
Tammo Greetfeld, a strategist at UniCredit in Munich, said: “Today we see some sort of stabilisation, which is more of a technical reaction to recent falls.
“The central bank move is merely positive from the psychological point of view, as it calms down the situation somewhat and shows that central banks are able to act in a coordinated manner.
“It doesn’t change anything about the fear in money markets, the deteriorating economic conditions and negative company results and guidance.”
Asia mixed
European commodity shares also rose, with miners BHP Billiton, Anglo American, Rio Tinto and Xstrata up 6 to 9 per cent and oil shares BP and Total up 2 and 3 per cent respectively.
Earlier on Thursday, Asia stock markets had remained volatile, despite the co-ordinated move by the world’s central banks.
Japan’s Nikkei 225 index on Thursday closed 0.50 per cent down from the previous day, when it lost its largest amount for more than 20 years.
Hong Kong’s Hang Seng recorded a gain of 2.16 per cent, but Sydney’s All Ordinaries index fell by 1.8 per cent.