Shares rise after Government action

5:31pm Monday 13th October 2008

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Relief over unprecedented bank rescue plans across the UK and Europe sparked a near-4% rally on London's blue chip share index.

The FTSE 100 Index gained 3% or 139 points to 4071 in the rebound, settling back from an earlier rise of almost 7% seen as investors cheered the moves.

Last week's bloodbath saw the Footsie fall nearly 9% on Friday at the end of the market's worst week since the 1987 crash.

Indices across Europe also recovered some lost ground after nations agreed a raft of emergency measures designed to ease the credit crunch.

France's CAC 40 rose 4.6%, while the DAX in Germany raced 7% ahead.

Countries which use the euro currency agreed to temporarily guarantee bank refinancing and pledged to prevent banks from failing.

In London, investors were digesting details of the Government's £37 billion bail-out package for three of the UK's biggest banking groups.

There was a mixed reaction for banking stocks, with those seeking State backing - Royal Bank of Scotland, HBOS and its merger partner Lloyds TSB - heavily down as the implications became clearer. There had been speculation that bank shares could be suspended to give the City time to examine the rescue plan. No such move was implemented, despite traders facing a number of announcements from the banks and the Treasury.

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