It was a thin day as many European markets wound down ahead of the Christmas holiday break, but shares rose sharply on the back of a strong dollar.

Frankfurt

Shares closed higher, taking their lead from rising stocks on Wall Street and a stronger dollar, dealers said.

The Xetra DAX closed at 4,978.62, up 99.15 or 2.03% from Tuesday's close, while the floor DAX closed up 126.39 at 4,951.77.

The rally lifted traders's hopes for an end of the year boost to take the blue-chip DAX above the 5,000-point level.

"I think we could see 5,200 to 5,250 next week," one trader said.

The Frankfurt stock exchange will be closed on Thursday and Friday for Christmas and re-opens on Monday.

Wednesday's session was marked by low trading volumes. DaimlerChrysler AG, Deutsche Bank AG and Deutsche Telekom AG were the only stocks to see more than one million shares exchange hands in Xetra trade.

Daimler was more than 2% firmer at DM157.80, BMW rose 3.8% to DM1,255 and VW advanced 3.05% to DM135.

Bank and retail stocks were also in a festive mood, with Commerzbank climbing nearly 2% and Dresdner Bank adding 2.2%. Metro, Europe's largest retailer, was nearly 3% stronger at DM130.55. Paris

Like Frankfurt, the Paris bourse was cheered by fresh gains on Wall Street, ending its last session before Christmas with a sharp rise.

The blue-chip CAC-40 index closed up 51.95 points, or 1.36% at 3,872.42 in a swing amplified by the thin pre-holiday volume totalling Ffr 6.8bn.

The Paris stock exchange will be closed on Thursday and Friday.

"The session was technically driven and volume was low," one dealer said, adding that most of the activity was due to end-of-year window-dressing.

Trading has wound down as brokers prepare for the changeover to the euro from January.

Among corporate news, Peugeot Citroen closed up 2.55% at Ffr844 after the company said it was raising production capacity at its Mulhouse factory in eastern France to fill a backlog of orders for the new Peugeot 206.

Traders said the sector was also bolstered by merger rumours with Ford Motor Co and Volvo featuring heavily in the speculation.

Insurer Axa, the second-most-heavily traded stock, ended up 0.64% at Ffr785, shrugging off news of a deterioration in the results of its Australian unit National Mutual.

Building company Bouygues fell 0.87% to Ffr1,140 after forecasting greater-than-expected losses at its fledgling telecoms business for 1998 and 1999.