Central banks unite to stave off euro crisis; markets buoyed

Six of the world's major central banks, led by the United States Federal Reserve, acted jointly on Wednesday to provide cheaper dollar funding to European banks facing a credit crunch.

The emergency move by the Fed, the European Central Bank, and the central banks of Japan, Britain, Canada and Switzerland was a repeat of the coordinated action to stabilise global markets in the 2008 financial crisis after the collapse of Lehman Brothers.

The move lifted stock markets in Europe, Asia, and the American continent. The Dow industrials chalked up its best day in more than two and half years, while Hong Kong shares jumped 5.5 per cent this morning.

Earlier on Wednesday, China also cut the amount of capital that its banks have to keep as reserve (cash reserve ratio) for the first time since 2008, which buoyed markets, including equities and gold.

The Fed on Wednesday cut the interest rate it charges other central banks for dollars it lends to them.

Five other central banks - Bank of England, Bank of Canada, European Central Bank, Bank of Japan and the Swiss National Bank - also entered into arrangements among themselves apart from the Fed to make funds available in each other's currency if required by the markets.