The US Federal Reserve led a global round of emergency interest rate cuts on Wednesday in an effort to contain the worst financial crisis since the 1930s.
The Fed said it was cutting its key federal funds rate by 50 basis points to 1.5%. China, the European Central Bank (ECB) and central banks in Britain, Canada, Sweden and Switzerland also cut rates in the coordinated response which analysts had been demanding.
Britain had earlier offered to pump at least 50 billion pounds ($122 billion) into its biggest retail banks to help them survive the crisis.
British Prime Minister Gordon Brown said the global financial market had ceased to function after bad debts stemming from a collapse in the US housing market poisoned the system.
Hong Kong had earlier followed Australia's lead in slicing a full point off its interest rates amid increasingly strident calls for a coordinated, global monetary policy response.
The US approved a $US700 billion package ($970 billion) last week to rescue its ailing banks -- although its stock market has continued to plunge -- and governments across the globe are now pushing ahead with their own emergency measures.
US stock index futures rose in choppy trade, pointing to a higher Wall Street open on Wednesday, after the Federal Reserve slashed interest rates in concert with other global central banks to calm jittery markets.
Futures pointed higher after five straight days of major declines by stocks. However, the futures were off their highs, suggesting investors have doubts whether the actions would have a lasting effect on recent unprecedented market turmoil.
The cut in rates came on the heels of an overnight stock market plunge in Asia, where the Nikkei slid more than 9%, and declines in Europe, where fallout from the credit crisis prompted Britain to pump $US87 billion of emergency capital to shore up its banks.
``This rate move is just about psychology,'' said Rick Meckler, president of investment firm LibertyView Capital Management in New York. ``Like any of the crises before, you need to see a major psychology shift. It's a slow process.''
He expected trading to be cautious and volatile, saying the market had long anticipated such action by the central banks.
Financial shares were likely to benefit, with the electronic-traded fund that tracks the financial sector up 2.3%.
S&P 500 futures rose 23.20 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures climbed
139 points and Nasdaq 100 futures gained 31 points.
The interbank cost of borrowing overnight dollars jumped again on Wednesday, indicating that credit markets remained gridlocked, according to the latest daily fixing from the British Bankers' Association, just before coordinated interest rate cuts.
Besides the Fed, the European Central Bank, Bank of England, Swiss, Canadian and Swedish central banks announced rate reductions.
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