The United States Government bail-out of Citigroup and the stimulus package introduced by the British Government yesterday sparked a rally in global sharemarkets.
Wall Street soared, capping the best two-day run since the aftermath of the 1987 sharemarket crash, as investors breathed a sigh of relief and helped create an enormous market rally.
The US Government has agreed to back most of Citigroup's potential losses from $US306 billion ($NZ566 billion) in risky assets and inject $US20 billion in new capital, its biggest effort yet to prevent a big bank from failing.
Shares in Citigroup, the second-largest US bank, surged nearly 60%.
Other financial sector shares rose as the bail-out plan eased fears of a sector collapse.
"The markets love a bail-out. It seems to have instilled a bit of confidence in the sector itself," ABN Amro Craigs broker Chris Timms said.
However, for Mr Timms, it was the British Government which provided the major impetus for the global rally, in which European markets began to show renewed heart.
The London FTSE rose about 10% on the news of the spending plans, which will give a 20 billion ($NZ56 billion) fiscal boost over the next three years, pushing national debt towards £1 trillion.
British Finance Minister Alistair Darling said he was setting a "temporary operating rule" within the main fiscal framework, with expectations of balancing the budget put off until the 2015-16 tax year.
Adding to the optimism, US President-elect Barack Obama named his team of economic advisers, with the appointments viewed as favourable for Wall Street.
Mr Obama appointed New York Federal Reserve president Timothy Geithner as Treasury secretary and Lawrence Summers, who previously held the Treasury post, as director of the National Economic Council.
Mr Timms said the Asian markets had continued the global rally, as had Australian markets on opening.
The Australia All Ordinaries Index had started to fall by mid afternoon, but Asian markets remained about 4.5% higher.
In New Zealand, the local market was in recovery mode, trying to regain losses from last week.
Company profit downgrades would remain a major issue for investors, Mr Timms said.
Nuplex, which issued a profit warning yesterday, was down 13% as investors "slammed" the company.
"The focus is now on earnings ability and the ability to maintain a dividend stream. Nuplex said at its AGM in October that things should be all right. Then here they are with a downgrade.
"Any signals on the downside will see companies savaged. In this market, people are looking for sustainable earnings. Any company threatening to cut its dividend will not be loved in this market."
Mr Timms believed that as bank interest rates continued to fall, shares would become more attractive for some investors.
Some of New Zealand's top companies were paying dividend yields of 10%.
The market was coming off a low point, and while the troubled times were not over, it was likely that shares would become more attractive as interest rates fell.
The New Zealand Stock Exchange was the obvious place to look.
Elsewhere, Pakistan won final approval for an emergency $US7.6 billion International Monetary Fund loan to steady the finances of the country.
