Markets react to $180bn cash injection

Global markets have suffered over the last few days amid the collapse of Wall Street giant, Lehman Brothers, and the rescue of US insurance giant AIG, with many fearing that other financial institutions would suffer the same fate.

US stocks increased in early trading today after Central banks from the UK, US, Europe, Canada, Switzerland and Japan injected $180 billion (£100 billion) into the global banking system in a bid to calm investors.

The injection of cash is the fourth such concerted effort since the start of the credit crisis last summer.

The main Dow Jones index was up 1.34%, or 142.2 points, at 10,751.8, in early exchanges in New York.

Meanwhile, in early afternoon trading, the FTSE 100 index was up 36 points at 4,948.7, while Germany’s Dax index was up 0.8% and France’s Cac 40 increased 1.23%.

Yesterday, the Bank of England extended its Special Liquidity Scheme until 30 January 2009 ‘in light of the current disorderly market conditions‘. The scheme was due to expire next month.

In the UK, the news of the Lloyds TSB and HBOS merger lifted shares but in the US, there are fears for Goldman Sachs and Morgan Stanley, the remaining two independent investment banks on Wall Street, after shares in the two organisations plummeted.

Morgan Stanley is believed to be holding merger discussions with Wachovia, America’s fourth-largest bank, while Goldman Sachs may not be able to remain independent, according to analysts.

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