An initial 100 point gain (2%) by London's leading share index, the FTSE, was pared back by lunchtime to a 16 point rise. At 1200 GMT the FTSE index stood at 5233. Poor trade figures did not seem to move the market, but trading was thin after initial futures-driven activity.

But in Frankfurt the DAX index powered ahead by 115 points, or more than 2%, after the European summit seemed to endorse job growth over the fight against inflation.

The market was also boosted by the final agreement of shareholders for the merger of Daimler Benz and the US Chrysler group to go ahead.

In Paris, the Cac 40 index also posted a strong gain, with up 47 points or more than 1% by lunchtime (1200GMT).

The expansionary outlook by European governments was also good news for exporters. The dollar strengthened against the D-mark on the hope that European interest rates might fall faster, making European exports cheaper.

Tokyo

The main share index in Japan, the Nikkei, was down 2.1%, or 301 points, to finish at 13,843, on further worries over the health of the financial sector.

Last week the government finally moved to nationalise the most troubled of Japan's 19 big banks - the Long Term Credit Bank of Japan.

But confidence was shaken by news that Moody's Investors Service had placed under review for possible down-grade the ratings on four Japanese major banks and eight major insurance companies.

The governor of the Bank of Japan, Masaru Hayami, said that the cautious lending by the banks, overburdened by bad debts, is slowing down any recovery.

"There is a major decline in capital spending due to the cautious lending..it is difficult to see a quick economic recovery," he said.

And chief cabinet secretary Hiromu Nonaka said that the government would take punitive measures against banks with too-tight lending policies, including the suspension to business contracts.

Last week Tokyo shares had recovered from their record lows, rising 10% until the rally fizzled on Friday.

Dealers believed that profit-taking contributed to the fall in the market.

New York

The worldwide share rally also came to an end in New York on Friday.

US stocks headed down

The benchmark Dow Jones average on the New York Stock Market headed lower within minutes of the opening bell.

Jim Benning, a trader at BT Brokerage said: "This is just a little rest. The market has been up for seven days in a row."

The spark behind most of those gains was the Federal Reserve's unexpected decision to cut interest rates again.

It was the second rate cut in a month by the central bank, which has been trying to combat growing global economic turmoil.

But the Dow ended its seven-session winning streak on Friday - closing 80.85 points down at 8452.29.

Share prices on the Nasdaq exchange, where a large number of high-technology stocks are traded, ended down 8.79 points at 1,693.85.