Stocks soar as governments to buy bank stakes

By Eddie Evans

NEW YORK (Reuters) - Governments around the world bet hundreds of billions of dollars to rescue failing banks on Monday, sending world stocks soaring and giving Wall Street its biggest one-day gain ever.

Britain, Germany, France and other European countries pledged more than 1 trillion euros ($1.36 trillion) for bank guarantees and equity stakes, while U.S. officials said they were finalizing a similar plan.

The Dow Jones industrial average and the S&P 500 index raced to an 11 percent gain, their biggest ever, after recording their worst week in history last week amid panic over collapsing banks and fears that major economies were headed towards recession.

European stocks soared 10 percent.

"Sometime last week it seemed like we faced Armageddon, so to have a coordinated plan on stabilizing banks is huge progress," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

Wall Street also focussed on investment bank Morgan Stanley, which reached a financing deal with Mitsubishi UFJ Financial Group Inc (MUFG), possibly with U.S. government support. Morgan shares soared 87 percent, after losing 58 percent last week.

U.S. Treasury Secretary Henry Paulson met with top Wall Street bankers on Monday in a scramble to finalise a plan to take government stakes in troubled banks, with an announcement expected as early as Tuesday.

This was an about-face from a previous U.S. focus on buying bad debt from banks, after world finance ministers coalesced around a British proposal at weekend meetings in Washington.