Shares jump sharply higher

There were big gains again in Europe

European and US stock markets posted big gains on Tuesday as the tentative revival in global share prices gathered strength.

The latest spark for gains was better than expected consumer confidence figures for the US, which suggest that recent interest rate cuts may yet succeed in heading off recession.

The Dow Jones Industrial Average surged 260 points during the day, to close at 9,947.

Many shares have now managed to clamber back above the levels of a week ago when prices plummeted.

In Europe, London's benchmark FTSE 100 index surged nearly 3% to close at 5,728, while Germany's leading Dax index ended the day 3.7% stronger at 5,938 and France's Cac 40 was 2% higher at 5,235.

Technology stocks were also climbing, and the Nasdaq gained 54 points to close at 1,972.

Markets unmoved by Greenspan

There was also nothing to worry the markets in a speech by Federal Reserve chairman Alan Greenspan, who told economists in Washington that the Fed, the US central bank, was working to improve the way it measured the "new economy".

Such improved measurements - which take into account factors like the huge increase in the power of computers - have in the past boosted the figures for US growth and productivity, adding to the confidence that the Fed could allow the US boom to continue without risking inflation.

But now, with the economy slowing sharply, Mr Greenspan gave few clues as to whether he planned further rate cuts

Earlier Asian markets had fallen, with Tokyo's Nikkei index closing down 1.6% at 13,638 and Hong Kong's Hang Seng index down 2% at 12,708.

Markets will also be watching the mixed signals on the economy coming out of the White House.

European rate cut

President George Bush, who is touring the country to promote his plan for a $1.6 trillion tax cut, has been accused of "talking down" the economy to make the case for a tax cut more compelling.

However, his Treasury Secretary, Paul O'Neill, said that he had "absolute confidence in our economy going forward" and predicted that the US economy would grow by between 0.25% and 0.75% in the first quarter of 2001.

The European Central Bank, meanwhile, is widely expected to cut interest rates in the 12 eurozone countries that use the euro on Thursday - a move that could boost European shares and is already helping the euro.

The move was signalled last week when ECB chief economist Otmar Issing, and Bank of France chief Jean-Claude Trichet, said the bank was no longer worried about inflation.

"While we were very, very concerned about inflation a month ago...we are not any more today," Mr Trichet told French radio.

Debate about merits

And the Organisation for Economic Cooperation and Development (OECD) said it was also expecting a rate cut.

"Our economists are leaning heavily toward the view that there should be an interest rate cut," OECD Secretary General Donald Johnston said on Tuesday.

Eurozone inflation in February was 2.6%, above the ECB's inflation target of 2%, but slowing growth and falling business confidence in Germany, Europe's largest economy, is forcing attention on rate cuts.

The ECB, the only central bank not have cut rates so far, has now said its growth forecast for Europe of 3% this year was not attainable.

However, there is some doubt among analysts whether the ECB is speaking with one voice, with the ECB president, Wim Duisenberg, reportedly arguing for a "wait and see" approach.