* European countries throw EUR 2trn at credit crisis * Fed to remove cap on dollars sent to foreign banks

The sight of governments around the world marshalling unprecedented resources to prop up some of the most famous names in banking has helped to restore optimism to battered stock markets.

In the US, Treasury secretary Hank Paulson summoned the chief executives of major banks to inform them the government would be taking stakes in at least nine institutions, the first step in a comprehensive bailout likely to be announced this morning.

Some $250bn (144bn) is expected to be set aside for capital infusions, and the Treasury is also considering guaranteeing some types of bank debt, making it more likely institutions will also be able to raise private capital.

Meanwhile, Germany, France and other eurozone countries joined the UK in promising money for banks and government guarantees on lending. In all, European countries put almost 2trn (1.6trn) behind the continent's financial system yesterday.

Equities staged a powerful rebound from last week's slow-motion crash, with the UK's FTSE 100 heading back up 324.8 points (8.3 per cent) to 4,256.9, and other global markets following suit. The French stock market enjoyed its best day ever, up 11.2 per cent; Germany's Dax rose 11.4 per cent, and in New York the Dow Jones surged 936 points, or 11.1 per cent, to 9,388 - its biggest percentage rise since 1933.

Investors had last week routinely raised the spectre of a new Great Depression; traders yesterday said concerted government action made that disastrous outcome less likely, and long-term investors were tempted by the idea of picking up shares in solid companies at bargain prices.

European government leaders made good on promises at their weekend summit meeting, when they pledged a "coordinated and ambitious" response to the financial crisis, including a raft of common measures to guarantee, refloat and partially nationalise the banks. The plans, modelled on the UK bailout, were described as a possible "super bazooka" by Michael Saunders, an economist at Citigroup. The aim is to restore a semblance of confidence to the financial markets so credit can once again be extended to the businesses and consumers that need it.

"No one can expect that any of this will avert recession," said Mike Lenhoff, chief strategist at Brewin Dolphin in London. "The forces of economic contraction were set in motion long ago by the credit crisis.