The fight over the Bush administration’s plans for a $700bn financial rescue package unnerved markets and spilled over into the US presidential race yesterday as John McCain, the Republican nominee, said he would put his campaign on hold until a deal was reached.

Amid uncertainty about the plan’s prospects, US money market funds controlling thousands of billions of dollars in assets led a stampede to safety, buying short-term government debt, selling commercial paper and withdrawing funds from the interbank market. As a result, the rates that banks charge each other soared, while yields on Treasury bills plunged.

The difficulties facing the White House were highlighted by Mr McCain, who announced he would suspend his campaign today and called on Barack Obama, his Democratic rival, to agree to delay a widely anticipated presidential debate scheduled for tomorrow.

Financial Times