World Markets Bounce Back, Big Time

World stock markets soared Friday after a punishing week as news of a possible U.S. government plan to rescue banks from toxic mortgage debt brought hope of a letup in the world's worst financial crisis in decades.

China's key stock index surged 9.5 percent - its biggest one-day percentage gain ever - as investors took heart from government moves to support the markets, although most of the buying was over before noon.

The benchmark Shanghai Composite Index gained 179.25 points to 2,075.09 and stayed at that level all afternoon after many shares quickly hit the 10 percent upside daily limit.

"I knew it would rise, but didn't expect it to jump so high," said Zhao Yueming, a dealer at Cinda Securities, in Shanghai.

Hong Kong's Hang Seng Index jumped an astounding 9.6 percent during the day's trading. Japan's Nikkei 225 average was up 3.8 percent at 11,920.86.

British stocks soared in early trading after a ban on short selling of financial stocks and news of the U.S. plans to combat the crisis.

The FTSE 100 index was up 7 percent, while banks stocks made big gains. The Royal Bank of Scotland Group PLC is up 42 percent, Lloyds TSB Bank PLC 33 percent and Barclays PLC 29 percent.

Short selling, in which investors sell borrowed shares hoping to buy them back at a lower price and pocket the difference, has been blamed for sending banks' share prices plummeting.

Some British politicians claimed that short-selling attacks were partly responsible for HBOS PLC's abrupt takeover by banking rival Lloyds TSB PLC on Thursday amid a sharply falling share price.

In Washington, the Securities and Exchange Commission mirrored the British move overnight, temporarily banning short-selling in financial companies.

Russia's two main stock exchanges resumed trading Friday with such gusto they couldn't even stay open.

Trading was suspended twice Friday under rules that mandate a stoppage when stock prices rise too quickly.

MICEX, where most share trading takes place, was up at least 23.1 percent since the start of trading following a two-day suspension. The RTS was up 15.5 percent. But both markets were shut down for a second time amid fast-pace gains on the first day of trading since Wednesday.

Both indexes were closed on Wednesday after the MICEX suffered one-day losses on a scale not seen since Russia's 1998 financial collapse. It plunged 25 percent in just 2 1/2 days on the back of tumbling oil prices and Wall Street turmoil, and was down more than 55 percent since its May peak.

Following days of steep losses, Asian markets got a boost from overnight gains on Wall Street, where the Dow Jones industrial average surged 410.03, or 3.86 percent, to 11,019.69 - the biggest percent gain since October 2002.

Investors also were encouraged by news that the U.S. government was seeking the power to rescue banks by buying distressed assets at the heart of the financial system turmoil that's brought down Wall Street giants Lehman Brothers, Merrill Lynch and Bear Stearns.

Details of the plan were still being worked out, but U.S. Treasury Secretary Henry Paulson emerged from a nighttime meeting on Capitol Hill to say he hoped to have a solution "aimed right at the heart of this problem."

"It definitely gives investors a light at the end of the tunnel," said Daniel McCormack, a strategist for Macquarie Securities in Hong Kong. "The solution is of such a magnitude that it could eventually fix the problems... That's hugely important at the moment because that's what markets are focused on."

The biggest bonus of a potential government fix is it could help the banking industry as a whole, said Scott Fullman, director of derivative investment strategy for New York-based institutional broker WJB Capital Group. Until now, the U.S. government has selectively bailed out institutions that were the most vulnerable.

The news triggered a rally in U.S. stock futures, suggesting Wall Street would advance Friday, too. Dow futures rose 126 points, or 1.2 percent, to 11,108 and S&P 500 futures rose 32 points, or 2.6 percent, to 1,234.4.

"Bear markets are extremely sensitive, and this market on a scale of one to 10 is a 13," Fullman said. "I don't say any prudent money manager would say we're out of the woods, but right in this moment it all seems positive and leading toward an upward move for the market going into Friday session."

Further aiding the markets, the Bank of Japan pumped another 2 trillion yen ($18.7 bilion) into money markets, following Thursday's coordinated effort by central banks around the world to keep the financial system liquid. It was the bank's seventh injection this week.

Word of a possible U.S. bailout lifted Asian banks, which had tumbled earlier this week.

Macquarie Group Ltd., Australia's biggest investment bank and securities firm, surged 35 percent.

Shares of China's biggest lender, Industrial & Commercial Bank of China Ltd, or ICBC, rose 14.2 percent in Hong Kong and 9.9 percent in Shanghai.

Japanese megabanks were up strongly, with Mitsubishi UFJ 9.8 percent higher and Mizuho Financial Group adding 9.6 percent.

In China, the market was driven partly by a government move to shore up the ailing markets by eliminating a 0.1 percent tax on share purchases, effective Friday. The government also announced plans to use an investment fund to buy stocks in three major banks to help stabilize their share prices, down sharply following Lehman Brothers' bankruptcy.

Bank of China, the country's second-largest lender, surged 10 percent , the daily maximum limit. China Construction Bank also had gained 10 percent.

Oil prices were steady in Asia. The October contract rose 24 cents to $98.12 a barrel midday, adding to its 72 cent gain overnight.