Leading European share markets have all posted strong gains, with the exception of the Dublin market, where more selling of the bank stocks and Smurfit depressed the market. The London market surged by 3.48 per cent on the day on a happy combination of strong Asian markets and new optimism about a cut in UK interest rates.
The Footsie index advanced by 180 points or 3.48 per cent to end at 5,347 points, its second biggest one-day rise in history and most of the other major European markets followed suit.
The rise was not however matched in Dublin, which alone of western European markets lost ground on the day with selling pressure continuing to drive the major banking stocks lower. The ISEQ overall index dropped 20 points to 3924.39, with the bank stocks again suffering heavily. Meanwhile Smurfit, which had touched an all-time low of 95p on Friday before closing at 100p, fell 2p to a 98p yesterday, suffering from a large seller of the shares who appeared in the market on Friday.
European shares were encouraged by Asia, where markets surged as a rise in Japanese shares and the yen helping ignite a region-wide rally which took Hong Kong stocks 8 per cent higher and Australian shares up 2 per cent.
Tokyo's benchmark Nikkei average posted its second-largest point rise this year, jumping 747.15 points or 5.32 per cent to 14,790.06, as institutional funds returned to the market amid new confidence about the outlook and encouraged by a rise of the yen against the US dollar. Malaysia's stock market meanwhile danced to its own tune, rocketing 22.5 per cent on heavy local buying which pushed the market to artificially high levels following last week's ousting of deputy premier Mr Anwar Ibrahim.
These increases gave London shares a fillip at the opening, while the approach of the regular meeting of the Bank of England's monetary policy committee on Wednesday and Thursday focused attention on rates.
An increasing number of observers think rates may be cut by the end of the year due to signs of a slowdown in the UK economy. The possibility of a US rate reduction also helped the mood in London.
The Fed chairman, Mr Alan Greenspan, said at a conference on Friday that the world financial turmoil would have an impact on the US economy and the next move in interest rates was as likely to be down as up.
Although Mr Greenspan's comments were couched in his normal cautious tones, the US money markets are now pricing in a fall in the benchmark Federal Funds rate by the end of the year. Many observers trace the start of the correction in global stock markets to comments by Mr Greenspan in July about the inflationary threat to the US economy. So his apparent change of heart was leapt on by traders anxious to mark up prices after the headlong decline of recent weeks.
Share prices on the Frankfurt stock exchange recorded a strong gain, with the DAX index finished up over 2.1 per cent from the Friday close. The index had surged above the psychologically-important 5000 level earlier in the session to a high of 5015.68, but soon fell back as investors were quick to take profits, traders said.
A trader at Bayerische Landesbank said that because matters in Russia were "still unresolved," he was advising his customers to remain cautious and take advantage of any gains to take profits.
