The Federal Reserve's biggest benchmark interest rate cut in over two decades stemmed a steep slide in global equity markets today, though US stocks still traded lower after Europe closed with solid gains.
The US central bank sought to ease market worries after dramatic losses the day before linked to fears of a spreading US recession and tight credit.
It cut key interest rates by 0.75 percentage point to 3.5 per cent, marking the first such cut between regularly scheduled meetings since just after the September 11, 2001 terror attacks on the World Trade.
European shares ended the day nearly 2 per cent up on the back of the US move.
The pan-European FTSEurofirst 300 index ended 1.9 per cent higher at 1,304.37 points, reversing a five-day losing run.
Ireland's Iseq Index rose 3.8 per cent to 6,496.87. This follows yesterday's 4.17 per cent drop which wiped some €3.6 billion off the value of companies listed on the exchange.
Germany's DAX closed 0.3 per cent lower, making it the worst performer among European indexes. The UK's FTSE 100 index rose 2.9 per cent, and France's CAC 40 added 2.1 per cent.
The Dow Jones industrial average was down 117.95 points, or 0.97 per cent, at 11,981.35. But the market recovered from a much steeper early sell-off that took the Nasdaq down as much as 5 per cent and shaved 450 points from the Dow.
US President George W. Bush predicted tonight that a deal could be reached with the US Congress soon on a fiscal stimulus package and said it was needed to deal with "uncertainty" in the economic outlook.
"I'm confident that we can get an agreement passed, and we can get an agreement passed in relatively short order," Mr Bush told reporters at an event to unveil a new program on financial literacy.
Earlier US Treasury Secretary Henry Paulson said he was confident the US and global economies were resilient but welcomed an emergency rate cut by the US Federal Reserve as a helpful move.
The US central bank cut benchmark US interest rates by a steep three-quarters of a percentage point while Mr Paulson was still answering questions after addressing a Chamber of Commerce breakfast meeting.
Mr Paulson acknowledged the US economy has slowed "materially" in recent weeks but, despite a meltdown in global stock prices, insisted that the global economy had "underlying resiliency" that would let it weather the storm.
"This is very constructive and I think it shows this country and the rest of the world that our central bank is nimble and can move quickly in response to market conditions," Paulson said.
The US Treasury chief, who headed Wall Street giant Goldman Sachs before taking over Treasury in 2006, said the $145-billion short-term stimulus package that President George W. Bush was asking Congress to work on was needed to minimize the impact of a US economic slowdown.
"We need to do something now, because short-term risks are clearly to the downside, and the potential benefits of quick action to support our economy have become clear," Mr Paulson said.
"The US economy is resilient and diverse," he said. "It's been remarkably robust and it will be again."
Bank of America reported a fall in fourth-quarter profit, hurt by mounting credit losses.
- Agencies