EUROPEAN stock markets have gained ground after Wall Street burst higher in early trade, only 10 fall back later.

European markets were swept higher in early trade when the impact of Wall Street's dramatic two per cent rise on Thursday surged across the Atlantic.

Shares on the Dublin market end, joyed a late surge, buoyed by strong pre Christmas rallies in London and New York. In the end, the Down Jones Index finished up 10-75 at 6,484.39.

The main highlight was the rise in financial stocks which benefited from the strength of the gilt market.

AIB was in good demand, rising 2p to 385p on the day. Bank of Ireland also managed to move strongly ahead, adding 51/2p to 5231/2p.

The Dow vindicated the market's optimism by rising more than 70 points within the first 15 minutes of trading but then ceded some of its gains.

"The Dow carried us up and carried us back down," said on London share dealer.

"The Dow's jump overnight was unbelievable," one senior dealer in London said earlier in the day. "It, certainly has given the market a, boost of confidence."

Europe's major bond markets, were lifted by Thursday's strong, bond rally in the United States, lending further support to stock markets.

British shares ended up, but well off their record peaks set earlier, after an early burst of buying on Wall Street faded.

Surging US stocks propelled the benchmark FTSE 100 to an intraday record at 4, 100 briefly before slowly giving back gains. The index ended 26.3 points higher at 4,077.6. In Dublin the ISEQ index of Irish share prices ended up just over eight points at over 2,667.

The advance added another leg to the British market's long awaited, year end rally, usually attributed to seasonal inflows of cash into investment fund coffers.

And with a recent spate of takeover bids promising to inject further cash into the market, as well as prompting further gains in other possible bid targets, some traders and analysts said the FTSE could push towards 4,200 before the year is out.

Yet major uncertainties remained over the outlook for 1997.

Signs that British economic growth is gaining pace are expected to force the Chancellor, Mr Kenneth Clarke, to raise interest rates in the first quarter of the new year.

German shares charged ahead, breaking out of the narrow trading range of recent days, boosted by a sparkling performance overnight on Wall Street and in US Treasuries.

The DAX index of 30 top German shares ended up 46.70 points, or 1.66 per cent at 2,854.45. But in post bourse computerised trading, the Ibis DAX was up just 10.71, or 0.38 per cent, at 2835.54, having fallen back from the earlier highs in sympathy with other markets.

French shares closed with a jump of more than 1 per cent in heavy turnover, tracking the Santa Claus rally" on Wall Street, traders said.

The blue chip CAC-4Q index. closed up 29.83 points or 1.33 per cent at 2,278.53. The index was up 3.4 per cent on the week.

The dollar trickled lower against the deutschmark, with the market winding down for the Christmas and New Year holiday season.

"We've seen nothing much today," one trader said.