Global stocks leapt, with 6.0 per cent gains in Europe and 10 per cent in Hong Kong early today, in a sharp rally of relief after world leaders agreed to pump billions of extra dollars into banks crippled by the credit crunch.

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Leading indices had plunged by almost a quarter in value last week on a collapse of confidence in the global financial system, while some shed as much as 10 per cent just on Friday in the worst performance for 21 years.

Central banks in Europe today fired a new broadside to free up frozen lending, by providing commercial banks with unlimited amounts of dollars in a joint operation that might be reinforced by their key Japanese ally.

Britain's government meanwhile said it would invest up to STG37 billion ($A94.6 billion) in ailing British banks Royal Bank of Scotland, HBOS and Lloyds TSB.

"Friday's late rally on Wall Street, a positive start to trade in Asia and news of widespread government intervention on a worldwide basis to prop up ailing banks looks likely to give equity traders ... something to cheer as the new weeks gets underway," said CMC Markets dealer Matt Buckland.

"But there has to be a degree of caution in the whole equation too.

"After all, we've seen high level plans from various quarters that were set to thaw frozen credit markets but the overall reaction has repeatedly been rather muted and the cynics will be left thinking that today could ultimately end up being more of the same," Buckland said.

The Bank of England, European Central Bank and Swiss National Bank announced plans on Monday to lend dollars to commercial banks for periods of seven, 28 and 84 days.

About 75 minutes after the start of European trade, London was up 5.53 per cent, Frankfurt rallied 6.24 per cent and Paris soared 6.67 per cent. Madrid and Zurich also jumped more than six per cent and Vienna surged 13 per cent.

Asia-pacific responds well  

Hong Kong closed up 10.2 per cent while Tokyo, Asia's largest stock market, was shut for a public holiday after slumping 24 per cent last week.

Australian shares ended the day 5.6 per cent higher - rebounding from an 8.3 per cent plummet Friday - after Canberra announced plans at the weekend to guarantee bank deposits.

In a bid to shore up the market Australia's central bank also pumped $2.85 billion into the financial system to ease the grinding liquidity crisis.

"This is the first really solid move for the (Australian) market to get its teeth into and it's a wonderful bounce to give people a bit of confidence," said ABN Amro Morgan private client adviser Bill Bishop.

He warned, however, that the government's deposit guarantee was probably not enough to ensure a lasting change in market direction.

New Zealand had a rollercoaster after opening lower, then moving into positive territory but ending the day 0.82 per cent off despite similar government guarantees on bank deposits to Australia.

Seoul bounced 3.8 per cent higher after the exchange was earlier forced to suspend trading temporarily to cool the market. Taiwan closed down 2.15 per cent.

The rosier stocks picture came after markets around the world saw some of their worst losses in years last week, as spooked investors fled shares in a worldwide collapse of confidence that triggered more panic selling.

The Saudi stock market, the largest in the Arab world, soared 5.5 per cent at the opening today to above the 6,000-point mark after hitting a four-year low two days ago.