Barclays has bought Lehman Brothers' US investment banking and capital markets businesses for $1.7 billion (£952 million), in the first of several sales of the collapsed bank's businesses.

Bob Diamond, Barclays' president and head of its investment bank, told Lehman staff of the deal on the trading floor of the bank's headquarters in New York at about 2.45pm yesterday. He expressed sympathy for the Lehman staff, many of whom were working on their CVs in anticipation of being made redundant, telling them “I feel your pain”.

Some of the 9,000 people employed at the business will now have some hope of moving to Barclays.

Under the terms of the deal, Barclays will pay $250 million for the business and a further $800 million for the New York headquarters and two outlets in New Jersey.

Barclays' shares rose 3.17 per cent to 317.75p today but Moody's warned that it has placed the bank's Aa1 debt and deposit rating under review.

The British bank will raise $1 billion from shareholders,such as sovereign wealth funds, to part-fund the acquisition.

Investors, who will not be given an opportunity to vote on the deal, recently gave Barclays an extra £4.5 billion to bolster its capital ratios.

Mr Diamond called the purchase a "once in a lifetime opportunity for Barclays". Bart McDade, Lehman's chief operating officer, conducted the talks on the collapsed bank's behalf. John Varley, Barclays' chief executive, remained in London.

Reports of the deal capped another tumultuous day on the world’s markets. The US Federal Reserve dashed hopes for a cut in American interest rates last night to help to quell the financial convulsions racking global markets in the wake of the collapse of Lehman Brothers.

In its statement last night, the Fed conceded that “strains in financial markets have increased significantly”. However, it made clear that the persistent threat from high inflation lay behind its reluctance to cut US rates. Although it said that it expected inflation to ease late this year and next, it emphasised that the outlook for price pressures “remains highly uncertain”.

The US central bank’s hardline decision to keep its official rates pegged at 2 per cent came despite another tempestuous day for markets as financial upheavals escalated after the failure of Lehman and amid fears over the fate of AIG, the insurer rescued by the Fed last night.

US stock markets reacted edgily to the Fed’s decision to spurn pressure for an immediate rate cut to ease the threat of a financial meltdown. The Dow Jones industrial average seesawed in and out of negative territory after the Fed announcement, having clawed back ground after Monday’s sell-off of US blue-chip shares inflicted their sharpest losses in seven years.

The Dow closed up 141.50 points yesterday at 11,059.00, boosted by optimism that Washington would back a last-ditch rescue of AIG.

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