Investors worldwide held their breath as talks on the US government's $700bn financial rescue plan entered the weekend with fresh momentum after stalling in the face of opposition from congressional members of President George W. Bush's own Republican party.

Stocks fell in Asia and Europe but rallied in late US trading as markets, earlier stunned by the collapse of Washington Mutual, the largest US savings and loan group, grew less concerned about the bail-out. Money markets remained under severe stress and the commercial paper market used by many companies to fund their business operations was largely frozen.

By late afternoon Friday, Nancy Pelosi, Speaker of the House of Representatives, said talks were back on track after sharp disagreements a day before, adding she was confident that a deal could be reached by Sunday.