The British government has thrown its troubled banks their second multi-billion dollar lifeline in three months in an effort to boost lending. Meanwhile, world markets presented a mixed picture one day before Barack Obama takes over as President of the United States.
Kicking off the week in Asia, most markets recorded modest gains.
Traders are balancing the prospect of a boost from a massive U.S. economic recovery package against concerns about just how bad some fourth-quarter corporate earning results might be in the coming days and weeks.
Japan's Nikkei was typical in gaining three-tenths of a percent.
In Europe, the banking sector remained volatile. Barclays is up on reports of a better than expected pretax profit report for the year. But the Royal Bank of Scotland was down after announcing it had lost $30 billion last year, the biggest loss in British corporate history.
The disclosure was made on the same day the British government rolled out a second bail-out plan for its financial institutions.
The multi-billion dollar program allows banks to insure themselves against losses on their riskier assets. The government will offer guarantees on their debt and it will also set up a $75 billion fund to buy up high-quality securities in an effort to get cash flowing again in the British economy.
British Treasury Secretary Alistair Darling says it is absolutely essential.
"What I am doing today is putting in place a range of measures that are all designed to get lending going again to large companies, to small businesses and to people," said Darling. "What we are trying to do is to make sure that we can reduce the effect of this lack of lending, because that is essential for any economy, and so doing will make the recession that all of us face across the world less severe, less deep than would otherwise be the case."
British Prime Minister Gordon Brown expects similar measures will have to be established elsewhere.
"The time it takes to deal with this problem will depend on the level of international cooperation," he said. "We know that the Obama administration is coming in with plans that I believe are similar to ours in relation to the fiscal policy, and we know that they are looking at what they can do in relation to the banks. Other countries will have to act as well."
Meanwhile, A new European Commission report says the European Union is facing a deep and protracted recession. Of those countries using the euro, unemployment is expected to exceed 10 percent in 2010.
It is predicted that the eurozone economy will shrink by nearly two percent this year before a slow recovery starts to take hold around a year from now.