The U.S. government agreed on Monday to take $25 billion stakes in several big banks in a bid to shore up the banking system and arrest the financial crisis, sources familiar with the situation said.
The move follows pledges by the governments of Britain, Germany, France and other European countries of more than 1 trillion euros ($1.36 trillion) to bolster their own banks, reports Reuters.
U.S. officials will announce details of the U.S. plan at 8:30 a.m. on Tuesday, the Treasury Department said.
As Asian markets opened on Tuesday, Japan's Nikkei average soared 9 percent.
That followed the biggest one-day gain ever in the Dow Jones industrial average and the S&P 500 index, both up 11 percent on Monday. Wall Street recorded its worst week in history last week amid panic over collapsing banks and fears that major economies were headed toward recession.
Stocks worldwide added more than $1.7 trillion in value on Monday, based on a record 9.3 percent gain in the MSCI world equity index.
"Sometime last week it seemed like we faced Armageddon, so to have a coordinated plan on stabilizing banks is huge progress," Jack Ablin, chief investment officer at Harris Private Bank in Chicago, said on Monday.
After talks with Wall Street bankers on Monday, Treasury Secretary Henry Paulson agreed to spend $250 billion on equity stakes in U.S. banks and to a three-year guarantee of bank-to-bank lending, sources familiar with the meeting said.