Obama pledges economic action, Britain sets stimulus

By Matt Daily

NEW YORK (Reuters) - President-elect Barack Obama formally set his economic team with a pledge to act "swiftly and boldly" and Britain unveiled a round of tax cuts and spending to stem a slide into deep, lengthy recession.

Global markets rallied for their second consecutive session after the U.S. government moved to rescue the nation's No. 2 bank, Citigroup Inc (C.N), with a $20 billion capital injection and a promise to shoulder hundreds of billions in risky assets.

That bailout, announced late on Sunday, sent a wave of relief through markets around the world that the U.S. government would not let Citigroup suffer the fate that brought down Lehman Brothers (LEHMQ.PK) and Bear Stearns.

In London, British Finance Minister Alistair Darling told Parliament he would cut sales taxes and offer new help for small businesses in a plan that would cost 20 billion pounds.

That package would set the world's fifth-largest economy on a path for future tax increases for high earners, he warned, and includes a surprise hike in payroll taxes for all but the nation's poorest after the next election.

As expected, Obama announced in Chicago he would nominate New York Federal Reserve Bank President Timothy Geithner, 47, as Treasury secretary and Lawrence Summers, 53, as director of the National Economic Council.

The two will head the Obama administration's efforts to fight the downturn that has sent the world's largest economy into its worst tailspin in decades.

"Even as we face great economic challenges, we know that great opportunity is at hand -- if we act swiftly and boldly. That's the mission our economic team will take on," Obama said.

Stock markets briefly pared gains on disappointment that Obama did not offer specifics on the size of his stimulus package expected to be rolled out in January.

"He wants to see stimulus enacted right away, but does not mention any specifics or numbers," said Lou Brien, market strategist with DRW Trading Group.

WIDESPREAD RESPONSE

The Citigroup rescue and statements from European leaders that they would seek to protect European industry, especially the automobile sector, were the latest efforts by government officials to restore confidence in battered global markets.

The Standard and Poor's Index of the largest 500 U.S. companies .SPX surged 6.5 percent, helped by the 58 percent rally in Citigroup shares.

"I am personally committed to Citigroup. No doubt about that," Saudi Prince Alwaleed bin Talal, the bank's largest investor, told CNBC television. The prince agreed last week to increase his Citigroup stake to 5 percent from less than 4 percent.

The Citigroup intervention had been widely expected in some form, but helped turn Asian markets higher .T. European stocks rose nearly 9 percent .EU.