Wall Street, London, Frankfurt, Paris and Tokyo all showed strong gains - buoyed by a new inflow of cash into the markets.

During the past months many worried investors had sold their shares and government bonds, moving into the safest investment of all: cash.

This accelerated the crash of the world's stock markets.

But now more and more investors are returning to the financial markets, hunting for bargains, and they have the cash to buy.

Wall Street

The new-found optimism showed first on stock markets in Asia and Europe, and proved to be infectious.

For the first time in three months the New York Stock Exchange's main index, the Dow Jones, broke through the 8,800 points level to climbing as much as 143 points to 8,853.

The afternoon, however, saw the familiar rollercoaster ride of profit-taking, as computer programmes issued selling orders. This reduced the Dow to a mere 25 point gain.

But the market appears to be in good health right now, and soon buyers returned to Wall Street and the Dow Jones ended the day at 8,783 - up 76.99 points.

The rally was not confined to "blue chip" stocks of big companies; the shares of smaller, less fashionable companies were gaining strongly too.

Technology shares had a particularly good day. The Nasdaq stock exchange, where many high-technology companies are listed, soared 35 points to 1,823.

Europe

London's key market index, the FTSE 100, gained 119 to close at 5,662.9 points. Volume was strong, with 976m shares traded.

However, many analysts counsel caution. James Dewhurst of Charterhouse said: "Some people are still distrustful of the rally and its longevity."

Whether London can continue its rally on Thursday will ultimately depend on the Bank of England.

The UK's central bank will announce its decision on interest rates at lunchtime and a cut of less than 0.5% will dampen market sentiment.

Share dealers in Tokyo have reasons to be merry again

Other European markets reported strong gains as well.

Frankfurt's Dax index closed at 4,841 points, up 136.

According to Jörg Schreiweis of Deutsche Genossenschaftsbank, investors with lots of cash are piling into the market: "The root of what's going on is there's too much cash in the market," while investors are feeling optimistic.

In Paris the Cac 40 gained 100 points to end trading at 3,684 points.

Asia

The global rally was probably triggered by one man: Barton Biggs, global strategist with Morgan Stanley. He told investors that "Japan could be the next great trade."

For many that was as a good enough recommendation as they needed and they began to pile into the market.

Tokyo's Nikkei index closed at 14,527 - up 575 points.