The world's major central banks have announced coordinated action to provide banks with dollars in a bid to ease the global money supply and stave off a fresh credit crunch, sending stock markets soaring.
The European Central Bank (ECB), the US Federal Reserve, the Bank of England, the Bank of Japan, the Bank of Canada and the Swiss National Bank agreed to reduce the cost of temporary dollar loans to the market, effective from Monday.
"The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," the banks said in a joint statement.
Markets surged after the announcement. The DAX was up by 4%, the FTSE-100 and the French CAC-40 rose 2.8% and 3.3%, respectively, by early afternoon. The main US indices also bounced by more than 2.7%.
Stocks and other risk assets have been trading low on concerns over concerns that eurozone leaders will be unable to find a resolution to their sovereign debt crisis. Political paralysis has led some in the market to fear that a collapse of the single currency is now on the cards.
The eurozone has struggled to fund its crisis response mechanisms and is now looking to the IMF for additional finances.
The move by the main central banks eases one of the principle concerns amongst investors - that a lack of liquidity in the international system will see banks cease lending to each other and to businesses, prefacing the kind of credit crunch that led to the worldwide economic slowdown.