European markets were again in a buoyant mood after gains in Tokyo and New York.

Frankfurt

Germany's Dax index gained 82 points in the first hour of trading, reaching 5,336, up 1.5%.

Speculation that there would be further mergers in the car sector drove up shares in Daimler, VW and BMW, despite a denial by Ford that it was planning to buy the company.

Shares in computer software maker SAP recovered after disappointing 1998 sales and pre-tax profit figures after the co-chairman said he saw significant growth in demand in 1999.

"There is a lot of cash among institutional investors and with the good results in the US yesterday, they are almost forced to buy," said a trader at a big German bank.

Paris

Paris stocks notched up healthy gains spurred by merger speculation and enthusiasm for the euro.

The Cac 40 index opened up 48 points higher, or 1.18% at 4,253 points.

The biggest gainer was LVMH, the luxury goods maker, whose shares soared 5.6% to 204 euros on news that the company was considering a tie-up with Gucci.