Europe bank rescue plan brings hope

By Walter Brandimarte

WASHINGTON (Reuters) - Chaotic financial markets may react positively this week to a long-sought coordinated response by world leaders to a financial tsunami threatening to wipe out the global banking sector.

The global financial system was on the brink of meltdown on Saturday after finance chiefs from the Group of Seven rich nations failed to agree on concrete, joint measures to end the crisis.

But European leaders rushed to Paris on Sunday to come up with a tangible plan to unfreeze capital markets and restore confidence.

Their plan included state guarantees for new medium-term bank debt and state injections of capital into banks, adding to help from the European Central Bank to unfreeze commercial paper markets.

"They're stepping up to the plate with all their fire power. It is literally a financial, economic call to arms," said Peter Kenny, managing director at Knight Equity Markets in Jersey City.

"It is not going to be overnight but it is going to help a lot. It is going to take the edge of panic off market psychology," he added.

U.S. stock futures opened higher on Sunday, suggesting Wall Street may rebound on Monday after eight straight sessions of losses on the benchmark S&P 500 index.

But volatility is unlikely to go away any time soon, analysts and bankers warned, because confidence cannot be restored overnight.