LONDON, Oct 14: World stock markets sprinted ahead for the second straight day on Tuesday on sustained investor confidence in government moves to shore up shaky banks and keep credit flowing.

Following solid gains in Asia and Europe the Dow Jones Industrial Average surged 4.07 per cent in the first trades but later ran out of steam on profit-taking.

The Dow was up 0.53 per cent at 9,437.71 at mid-day after investors, who on Monday sent the index surging above 11 per cent, came back down to earth, according to one market analyst.

The tech-heavy Nasdaq had fallen 1.21 per cent into negative territory at 1,822.02.

Market action came as the US government pushed forward a massive rescue for the ailing banking system with a plan to inject up to $250 billion in capital to banks and offer new guarantees to help restore credit flows.

Tokyo earlier in the day closed up by a record 14.15 per cent as Japan unveiled fresh market-stabilising measures.

The Bank of Japan said that in a bid to spur lending and thus ease a credit squeeze it was offering banks unlimited dollar funds at a fixed rate against appropriate collateral — a move that followed the lead of three central banks in Europe announced on Monday.

Banks worldwide need the US currency to finance operations but the market on which they would normally borrow it has seized up amid extreme tension that erupted when the US subprime mortgage market collapsed over a year ago.

London had closed more than eight per cent higher on Monday as Britain pumped billions of fresh dollars into credit-starved money markets and bought stakes in some of the nation’s biggest commercial banks.

“It’s far too early to say whether the key aspects of trust and confidence have returned to the markets, but it does appear as though we have turned a corner,” said GFT head of derivatives Martin Slaney.

“Another historic day for Wall Street is symbolic of the waves of relief you can feel rippling through the markets as a result of the multilateral rescue action,” he added.—AFP