LONDON, Oct 14, 2008 (AFP) - Stock markets soared for a second day running on Tuesday, with Tokyo posting its biggest-ever gain after governments worldwide threw lifelines to ailing banks amid the worst financial crisis of the past century.

Tokyo closed up by a record 14.15 percent as Japan unveiled market-stabilising measures including a relaxation of restrictions on corporate share buybacks.

In Europe, the London stock market was 3.40 percent higher in early trading.

It had closed more than eight percent higher Monday as Britain pumped billions of fresh dollars into credit-starved money markets and bought stakes in some of the nation's biggest commercial banks.

'It's far too early to say whether the key aspects of trust and confidence have returned to the markets, but it does appear as though we have turned a corner,' said GFT head of derivatives Martin Slaney.

'Another historic day for Wall Street is symbolic of the waves of relief you can feel rippling through the markets as a result of the multilateral rescue action,' he added.

US stocks had soared more than 11 percent on Monday, driving the Dow into its biggest rally in 75 years, as Washington said it would buy stakes in an array of financial firms.

US President George W. Bush and Treasury Secretary Henry Paulson were both due to make statements Tuesday on the action being taken by Washington and other major governments.

In morning deals on Tuesday, the Paris stock market jumped 4.18 percent, a day after rising more than 11 percent, its largest ever one-day gain,

Frankfurt was 3.14-percent higher early on, Madrid won 3.31 percent and Zurich rose 3.74.

European leaders on Monday unlocked more than one trillion euros in rescue funds for the troubled banking sector, pledging to plough capital into the hardest-hit banks and massively underwrite loans between financial players.

The turnaround on the Tokyo stock market was spectacular after it had plunged 9.62 percent on Friday, the biggest loss in two decades, capping its worst week ever. Japanese markets had closed Monday for a public holiday.

'The battle may not be won yet but the auguries are encouraging,' said Seven Investment Management analyst Justin Urquhart Stewart.

'However, don't be fooled, the enemy is not yet beaten and the war not won. This will continue for some months yet.'

The emergency steps sparked hopes of an easing of the credit market gridlock that has shaken confidence in the international financial system and sparked fears of a global recession.

Sydney closed up 3.7 percent on Tuesday and Seoul climbed 6.1 percent.

'We've seen phenomenal gains,' said Adrian Leppinus of Cameron Securities. 'There's been a mad rush for people to get back in.'

The roots of the financial crisis date to last year, when problems emerged with so-called subprime mortgages in the United States, and the world's markets are still about a third down since the beginning of the year.

Wall Street's Dow Jones index on Monday jumped 11.08 percent, snapping an eight-session losing streak.

It was the Dow's sharpest percentage rise since 1933 during the Great Depression.