Fannie Mae shares staged a rebound on Tuesday after the US mortgage financier received permission from its regulator to expand its activities amid the global credit squeeze.

Fannie shares began the day by falling as much as 7 per cent after the company revealed a first-quarter loss of $2.2bn and said it planned to raise $6bn in capital and cut its dividend to 25 cents a share from 35 cents starting in the third quarter.