Just after the collective sigh of relief was drawn following last week’s financial turmoil, a startling late plunge in the US stock market last night started a fresh wave of fears for banks, savers, pension holders and employees.

It had appeared that a $700 billion (£378 billion) bailout of the banking system announced by the US Government on Friday had restored some stability.

But the stock market euphoria generated by the plan disappeared yesterday as political squabbling over the terms of the rescue threatened to delay the Bill. A sudden surge in oil prices also unsettled the markets.

The Dow Jones industrial average, the benchmark gauge of US stock prices, dived 372 points, more than 3 per cent, to 11,015. wiping out Friday’s gains. In London the FTSE 100 ended down 75 points at 5,236, but it had closed before Wall Street’s slide accelerated. Global financial markets look set to endure another torrid session today.

The sharp rise in oil prices was sparked in part by concerns that the scale of the bailout may undermine the dollar, in which oil is traded. At one stage the US crude futures price for a barrel of oil leapt by a record $25.45 to $130, although traders attributed much of those gains to technical factors. Benchmark Brent crude was up $6.12 to $105.73. The political squabbling emanates from the Capitol where Democrats have threatened the progress of the legislation.

Barney Frank, chairman of the House Financial Services Committee and a powerful Democrat, wants to make the banks pay by allowing bankruptcy judges to make mortgage lenders change the terms of their home loans. Such a move would be designed to keep troubled borrowers in their homes. He also wants to legislate executive pay and allow Washington to claw back compensation later deemed to have been excessive.

But the confusion and upheaval wrought by the financial crisis brought at least one buyer to the table yesterday with Nomura, the Japanese bank, set to buy large parts of the collapsed Wall Street firm Lehman Brothers in London, potentially saving up to 1,500 jobs.

Pictures of Lehman staff leaving their offices with cardboard boxes full of their belongings underscored the full human cost of the crisis as almost 5,000 job losses appeared unavoidable. But Nomura has guaranteed to offer jobs to at least 700 of Lehman’s frontline investment banking staff and has signalled its willingness to employ hundreds more of its administrative and support staff.

The deal will transform Nomura’s presence in Britain and, after the demise of some Wall Street rivals, would make it the world’s largest independent investment bank by value, worth $25 billion with 16,000 staff.

Two of Wall Street’s most venerable institutions signalled the end of an era yesterday as Morgan Stanley and Goldman Sachs ended their status as investment banks. The move means that both will now start to take retail deposits and both will be financially stronger as a result.

The prospect that a successful Nomura purchase will be concluded in the coming days will fuel hopes that other parts of Lehman’s European operations could find willing buyers. But the sale will mark a big setback for Barclays, which was also vying to buy parts of the bank. Barclays agreed to pay $1.75 billlion for Lehman’s North American investment bank late last week but infuriated the bank’s London staff by agreeing to pay up to $2.5 billion in bonuses to 10,000 bankers in the US.

Barclays is expected to trigger a “war for talent” over the coming days as it tries to poach senior bank staff from under Nomura’s nose. It is understood that the bank has targeted about 100 of Lehman’s top performers and is likely to offer lucrative cash bonuses.

“We have said that we are interested in the equities operations and in individuals, or teams, but we won’t buy the entire Lehman investment bank,” a spokesman for Barclays said.

The Nomura deal marks a dramatic return to centre-stage of Japan’s once moribund financial sector. The industry has amassed collectively a “fighting fund” worth tens of billions of dollars, which is now ready to be deployed in acquisitions.

The speed of the deal surprised veteran Japan-watchers, who doubted that Nomura would be aggressive and nimble enough to outbid Barclays. The deal, say Nomura sources, was hammered out over the weekend and is thought to be the fastest company purchase commitment made by the notoriously conservative Japanese firm. Lehman plunged into administration last Monday and filed for protection from creditors in the US in a collapse that sparked the beginnings of a seismic shift across the world’s financial system.

Nomura also agreed a deal to buy Lehman’s businesses in Asia Pacific, which secures about 3,000 jobs in the region. Barclays also bid for the Asian arm.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive