US stocks staged their biggest advance in more than five years yesterday after the Federal Reserve took its most radical step yet to improve liquidity in financial markets, backed by smaller moves from other central banks.

In its second big intervention in three trading days, the US central bank announced that it would lend primary dealers in the bond market $200bn (£100bn) in Treasury securities for a month at a time and accept ordinary triple-A rated mortgage-backed securities as collateral in return.