European shares surged 3 per cent today, led by banks and heartened by major rallies in US and Asian stocks as investors bet on a US rate cut that could help shore up the battered economy.
At 9.35 am the pan-European FTSEurofirst 300 index was 3.3 per cent higher at 861.55 points, rising for a second consecutive day after five days of losses and after hitting a high of 875.04 in early trade.
In Dublin at 10.10am the Iseq index of Irish shares was up over 6 per cent at 2,674 a gain of 154 points. Banking stocks were among the best performers as Anglo Irish Bank rose 28 per cent to €1.46 and Irish Life and Permanent added over 25 per cent to €1.85.
The index has shed about 43 per cent so far this year as a snowballing financial crisis has hammered equities worldwide.
The European banks sector added more than 5 per cent. UBS gained 8.9 per cent, Santander rose 8.7 per cent and Standard Chartered added 12.5 per cent.
BBVA rose more than 8 per cent after saying nine-month recurrent net profit rose 9.1 percent to €4.321 billion from €3.962 billion, compared with €4.18 billion forecast in Reuters poll. Wall Street marked its second-best day ever today, with major US stock indexes surging about 10 per cent.
The US Federal Reserve is set to announce its rate verdict at 6.15pm (Irish time). In a Reuters survey, primary dealers expected the Fed funds rate will be cut to 1 per cent from 1.5 per cent.
"The Fed doesn't have too many more rate cuts left at its disposal but there is still scope for them to ease further," said Darren Winder, an equity strategist at Cazenove.
"The market should be able to rally on from that," he added. "We are due a significant rally from the levels we've got down to."
Japan could follow the United States in cutting interest rates this week, a source with knowledge on the matter said. Tokyo's Nikkei average soared 7.7 per cent.
Oil and gas producers boosted the market, with BP and Royal Dutch Shell gaining 3.4 and 4 per cent respectively, and Total up 7 per cent as US crude oil rallied 2.5 per cent.
Volkswagen, Europe's biggest faller, dived 44 percent after main Porsche took steps to ease a squeeze on short-sellers that more than quadrupled the stock in days and briefly made it the world's most valuable company. Deutsche Boerse meanwhile said will cut the weighting of shares in the blue-chip German DAX index.