European shares surged as trading got under way on Monday, boosted by hopes of rate cuts and taking heart from the strength of the dollar against the mark.

Frankfurt

In share markets, strong sentiment in car stocks drove trading in Frankfurt above the 4,500 level as the dollar strengthened to more than 1.65 marks.

In electronic trading,the Xetra Dax was up 1.9% at 4,565.01, up 84.58, after opening lower.

The floor Dax was at 4,555.64, up 104.55 or 2.4%.

Daimler gained 3.4% after saying that 97% of shareholders had agreed to swap their shares for DaimlerChrysler shares.

VW was up 2.5% while BMW put on 3.6%.

Paris

Paris stocks jumped 1.79% at the open on Monday fuelled by a stronger dollar and a surge of optimism that European rate cuts could be in the offing.

The Cac 40 index was up 41.81 points, or 1.23% at 3,435.57 at 1002 GMT.

Traders said comments by European Union leaders at a summit in Austria on Sunday suggesting that interest rates should be cut to fuel demand and create jobs were a big boost to nervous investors and had helped improve sentiment which was already looking brighter after last week's calmer trading.

Semi-conductor maker STMicroelectronics climbed 4.12%, echoing gains across European technology stocks.

One analyst said the sector was seeing increased interest as a result of analysts upgrades on Finnish telecom equipment maker Nokia and expected upgrades for its Swedish competitor Ericsson.

"STM is a big supplier of handset chips to Nokia, so is seen benefiting from an increase in its figures. Ericsson and Nokia are two big players so when people hear of upgrades they get interested in the sector as a whole," he said.

Retailer Pinault-Printemps Redoute was also up around 3% after it reported a rise in nine-month sales after the close on Friday.

Car stocks rallied in tandem with strong sentiment in the German auto sector.