KEY POINTS:
The world financial system's vital signs continued to show improvement yesterday in response to the US Government's US$700 billion "mother of all bailouts".
Sharemarkets, including the NZSX, made welcome gains.
Next to Wall St's 4 per cent rise on Friday and the 8.8 per cent gain by Britain's FTSE Index the same day, the NZX-50's 2.11 per cent gain yesterday looked fairly modest.
Market watchers said the large international investors who could influence the local market were clearly busy elsewhere.
The British and American gains, and yesterday's 4.5 per cent rise by Australia's ASX 200 were partly fuelled by bans on short-selling of financial stocks in those countries.
Short-selling enables investors to profit from falling stock prices, and has been cited as a factor in the collapse of Lehman Brothers last week.
The US Treasury plan will use taxpayers' dollars to buy "toxic" mortgage debt from financial institutions.
In response, banking stocks led the sharemarket recovery.
In the US on Friday, Washington Mutual shares rose 42.1 per cent, Citigroup 22.7 per cent, Morgan Stanley 20.7 per cent and Goldman Sachs 20.2 per cent.
In Britain, Barclays, Lloyd TSB, HSBC, Royal Bank of Scotland, HBOS and Standard Chartered went up between 17 and 32 per cent, and in Australia, ANZ was up 8.13 per cent, National Australia Bank 5.65 per cent, Commonwealth Bank 4.45 per cent and Westpac 4.93 per cent.
Meanwhile, Wall St's two remaining big investment banks, Goldman Sachs and Morgan Stanley, yesterday received regulatory approval to turn themselves into traditional bank holding companies.
The technical change will give them rights to obtain emergency funds from the US central bank, the Federal Reserve. But they will also be more tightly regulated than they were.
- ADDITIONAL REPORTING BY AGENCIES
