US stocks got off to a storming start and closed at an unprecedented 9374.87 points, up 2.29%.

Shares have charged ahead, but is it a new bull run?

A flurry of merger activity also sent European stocks soaring.

Major deals

A clutch of major companies announced they had either finalised takeover plans or were holding discussions about joining forces.

Deutsche Bank of Germany has indicated it is in advanced talks to buy Bankers Trust, the eighth largest US bank, for $10bn in a deal which would create one of the largest financial groups in the world.

Leading Internet group America Online could also be about to pounce on Netscape, which provides access to the worldwide computer network, in a $4bn deal.

AOL shares soared on the news and closed up 89.5 points while Netscape rose 41 points.

Sun Microsystems rose up 71points, and even Microsoft was up 119 points.

Christmas shopping spree

The prospect of a pre-Christmas shopping spree among some of Europe's largest quoted companies sent the FTSE 100 index of leading shares up be more than 2%, or 129.6, to 5848 points by 1545 GMT.

Shares have charged ahead, but is it a new bull run?

London shares were buoyed by news that engineers Siebe and BTR were planning a £7.6bn merger to create one of the UK's largest industrial groups.

Guardian Royal Exchange, one of the UK's largest insurance groups, has also confirmed it is considering its future and could be the subject of a takeover bid worth more than £3bn.

GRE shares leapt upwards on the news, shares reaching 350p by the close of trade.

Music giant EMI could also fall prey to a takeover bid, although Bertelsmann, the German media and publishing colossus, appears to have ruled itself out of the bidding.

Share recovery

Another strong performance in London comes after a sharp rise in share prices last week.

Almost £20bn was added to the value of UK shares on Friday.

The latest rise in prices caps a resurgence in UK shares over the last few weeks which has led some analysts to predict another bull run, characterised by a sharp rise in stock markets.

Prices fell sharply in Autumn amid fears of a global economic downturn.

Since then, however, investor confidence has returned following cuts in US and UK interest rates.

The Dow Jones index has now recovered nearly all of the losses it sustained in July and September.

Sustained recovery?

Wall Street traders seem optimistic that the Federal Reserve bank has moved quickly enough to cushion the American economy from the effects of economic turmoil around the world.

They now forecast that the expected slowdown next year will have a soft landing.

Moreover, the financial performance of American companies in the third quarter was generally better than expected.

The bears are always waiting in the background

However, some dealers remain sceptical about the market's ability to sustain the rise, and believe that we could still be in a bearish market, with shares suffering long term falls.

"Investors are running out of new stories to justify the stock market's high levels," said John Geraghty of North American Equity Services, a consulting firm.