London jumped by more than 5.0 per cent before falling back slightly in early afternoon trading, while Paris was up 4.10 per cent and Frankfurt won 3.58 per cent.

The London market was boosted by expectation that Britain's Labour government would unveil a bold strategy of slashing taxes and boosting spending under an economic stimulus package designed to combat looming recession.

'Once again, the market is faced with a weekend hangover where it has to decide whether it should feel relief that something has been done, or renewed unease that something had to be done in the first place,' said Calyon analyst Daragh Maher, referring to the rescue of Citigroup.

The US government has vowed to protect Citigroup against 'unusually large losses' and give it US$20 billion (S$30.34 billion) from a massive financial rescue package approved by Congress.

The announcement came shortly before midnight on Sunday, after the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation reached an agreement with Citigroup to provide a package of guarantees to the bank saddled with staggering losses.

The Hong Kong stock market closed down 1.6 per cent on Monday, even though US federal regulators also agreed to back up to US$306 billion worth of Citigroup assets.

Tokyo was shut for a public holiday, while Seoul ended on Monday down 3.3 per cent and Shanghai shed 3.67 per cent.

'Investors need proper guidance on the news and are waiting to see the reaction in the US markets,' Phillip Asset Management fund manager Y.K. Chan told Dow Jones Newswires.

'For now, they just can't gauge how positive this development is.'

Wall Street was to reopen at 1430 GMT (10.30pm Singapore Time). On Friday, US shares had staged a strong late rally as traders cheered reports that New York Federal Reserve chief Timothy Geithner would be named the next Treasury secretary by president-elect Barack Obama.

The Dow Jones Industrial Average vaulted 6.54 per cent, ending the week on a positive note after two days of brutal selling that erased some 10 per cent from the main indexes.

The tech-heavy Nasdaq composite climbed 5.18 per cent on Friday and the Standard & Poor's 500 index jumped 6.32 percent.

Meanwhile, Mr Obama announced plans on Saturday to create 2.5 million new jobs in a bid to shore up the US economy before his inauguration.

The Washington Post reported Monday that Obama and his Democratic allies in Congress are preparing plans for a second massive economic stimulus programme that could total as much as US$700 billion over the next two years. -- AFP