Shares surged after a round of interest rate cuts was announced throughout Europe which produced a starting rate of 3.00% for the euro.

That helped cement a rebound in S&P 500 futures and send the dollar up against the German mark and other European currencies.

German shares started to pick up ahead of the announcement on speculation about the cut and pushed ahead on confirmation.

The Bundesbank cut the repo rate to 3.00% from 3.3%. France mirrored the move, while cuts were also delivered in Ireland, Finland, Holland, Austria, Spain, Italy and Portugal.

Just before the news, the Xetra DAX was up 56 at 4768.3 after an early low of 4592.07.

At 1316 GMT, the Xetra DAX was up 115.09 at 4827.29.

Earlier there were rumours that one or more US hedge funds may be undermining investor confidence by selling off German equities futures.

French stocks also surged to session highs on news of the European rate cuts.

The CAC-40 index was at 3688.24 just before the announcement at 1300 GMT.

It recovered from an early low of 3584.42 to stand at 3733.99.

"We have seen a strong knee jerk reaction to the rate cuts from European equity markets," said Matt Dennis, European strategist at ABN Amro. "