Washington  - US stocks soared Monday as investors welcomed the government takeover of beleaguered mortgage giants Fannie Mae and Freddie Mac.

The Dow Jones Industrial Average and broader Standard & Poor's 500 Index both climbed more than 2 per cent, after Asian and European stocks made extensive gains Monday.

Financial and homebuilding shares led the US surge after the Treasury on Sunday said it would place Fannie and Freddie in a conservatorship, replacing their chief executives and eliminating share dividends.

The bailout means the government now formally guarantees about half of the US mortgage market, or nearly 6 trillion dollars worth of home loans owned or backed by the two government-chartered lenders, which have struggled to raise enough capital to weather the subprime mortgage crisis.

Investment banks and lenders have suffered more than 500 billion dollars in writedowns of mortgage-related assets over the last year, as plunging housing prices prompted a record number of homeowners to default on their mortgages.

The financial fallout from the housing crisis has limited consumers' access to new home loans and other types of loans - a key reason for the wider economic slowdown in the United States.

The blue-chip Dow climbed 289.78 points, or 2.58 per cent, to 11,510.74. The S&P 500 Index was up 25.48 points, or 2.05 per cent, to 1,267.79. The technology-heavy Nasdaq Composite Index rose 13.88 points, or 0.62 per cent, to 2,269.76.

The US currency rose 70.79 euro cents from 70.09 euro cents on Friday. The dollar climbed against the Japanese currency to 108.19 yen from 107.73 yen on Friday.

Gold was little changed at 802.50 dollars from 802.80 dollars per fine ounce on Friday. (dpa)