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

The cut in rates which was led by the German Bundesbank and was swiftly followed by the Bank of France and others sent the dollar up against the deutschmark and other European currencies.

The German and French cuts were followed within minutes by the other countries that will adopt the new euro currency: Italy, Spain, the Netherlands, Portugal, Ireland, Austria, Finland and Belgium, which also acts for Luxembourg.

Frankfurt

Germany's blue-chip Xetra DAX index turned early losses into gains as central banks across Europe cuts interest rates.

Traders said that the market looked positioned to continue its fourth-quarter rebound after its plunge during the world financial turbulence.

The electronically traded Xetra DAX was up 2.1% at 4,812.00 points, rebounding after spending most of the day in negative territory.

The floor DAX climbed 2.7% to 4,819.07 points.

"I think some clients are taking profits because they are saying 3.0% - that's where the European Central Bank wanted rates for Europe," said Stefan Hütermann of Paribas, saying no more near-term rate cuts were expected.

"But we could get to around 5,000 at the end of December... as people become a bit more confident that the worries of the past months are over," he said.

Among the big winners were Lufthansa which was up 6.2% to DM 37.60, and Deutsche Telekom up 5.3% at DM49.60.

Banks and chemical shares also gained on the rate cut, with Deutsche Bank jumping 3.8% to 99.20 marks.

Hoechst led chemical stocks, surging 4.6% to 72.30 marks after having slumped when analysts questioned the structure and potential to produce blockbuster drugs following its planned life sciences merger with Rhone Poulenc.

BMW was down 1.8% at 1,121 marks as investors questioned the restructuring going on at its British Rover unit.

Credit Suisse First Boston on Thursday cut its earnings-per-share forecast for BMW due to higher-than-expected losses at Rover.

Paris

Leading French stocks soared on the news of the cuts, closing up 1.8% at 3715.