Encouraged by an early surge on Wall Street, European markets moved determinedly higher across the board, although the Christmas spirit was partly marred by seasonally low volumes.

Frankfurt was higher, led by an 11 per cent technical rebound in BMW, and the Xetra Dax index finished 159.69, or 3.4 per cent, higher at 4,826.70. Trade was, however, very light, with many investors reluctant to commit themselves to new strategies ahead of the euro's introduction. BMW was the day's runaway winner, soaring 119 deutschmarks to DM1,189 in a technical recovery after recent losses, but other car stocks were more subdued. DaimlerChrysler rose DM3.95 to DM155.45 and Volkswagen was DM5.10 higher at DM130.60.

Industrial conglomerate Viag put on DM63, or 6.7 per cent, to close at DM1,000 as its supervisory board agreed the merger with Alusuisse. The company also confirmed that talks are underway on the sale of its Kloeckner steel trade business to Thyssen.

Paris rose 111.5 to 3,803.41 on the CAC 40 index, a gain of 3 per cent that left the benchmark near the best of the session.

Insurer Axa-UAP was the hot stock, adding 51 French francs, or 7.2 per cent, at Ffr755, followed by retail leader Pinault-Printemps, where old stories about corporate activity sent the shares up Ffr63 at Ffr1,003.

Amsterdam climbed 34.59, or 3.1 per cent, to 1,152.45 on the AEX index, heavily influenced by Philips, which continued to gain on share buy-back plans.

Zurich climbed 2.4 per cent, but dealers said volumes were small and an element of window-dressing was involved.

Madrid saw sharp gains at telecoms heavyweight Telefonica and ended 15.49 higher at 836.86 on the general index.