After 14 minutes of trading Wall Street had reached a historic high - and kept on climbing. At 1625 GMT the key index of the New York Stock Exchange, the Dow Jones, was up 129 points at 9,440. Never before has the Dow traded above the 9,400 points level.

Technology shares were soaring as well. The Nasdaq index was up 48 points - for the first time in history above the 2,300 points level.

London on a roll

London's key share index, the FTSE 100, managed to come within 25 points of its record high achieved in July last year. At 1625 GMT, the Footsie was up 186 points at 6,143.

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Rumours about impending mergers in the telecoms and pharmaceutical sectors boosted a market that had seen a slow start to the year. One dealer, however, warned that the merger news and hope for new UK interest rate cuts could soon be overshadowed by bad economic data. "We may skim across a recession in the UK", he said.

Another one confessed: "We are slightly bemused by this rally. But it is liquidity driven and it doesn't look like its going to stop just yet."

Several surveys published in the new year suggest that British manufacturers are in deep trouble and that the service sector is weakening too. They have fuelled speculation that the Bank of England's Monetary Policy Committee might decide to announce another rate cut either this Thursday, or at its next meeting in February.

The majority of analysts, though, believes that the Bank will hold steady. As a result, the pound strengthened against both the euro and the US dollar.

Buoyant Europe

On the continent, share markets are still displaying some euro-phoria. On Tuesday, Frankfurt and Paris had seen their share prices slide briefly as investors took some of the tremendous profits gained at the start of the week.

German shares are up sharply

But now they are on the up again, and Paris got close to its all-time high. At the end of the day the Cac 40 index of the French bourse was up 94 at 4,294 points, after having briefly ventured above the 4,300 level.

Germany's Dax index, meanwhile, managed to deliver another treble point gain, closing up 189 points at 5,443. Car shares were taking the lead and BMW was the top performer, despite the company's repeated denials that it would not merge with another manufacturer.

Traders said that the German market was missing the liquidity needed to counter erratic price movements since the launch of the euro. "It's surprising that the market started (the new year) with such a momentum and such erratic price movements," a stock options trader at Bankgesellschaft Berlin said.

The Zurich stock market was another strong performer, rising 124 points to 7,668.

The mood of European investors was boosted by a strong recovery of Asia's stock markets and sharp gains the day before on Wall Street.

In Tokyo the Nikkei index gained 235 points to close at 13,468.46, while Hong Kong's key market, the Hang Seng was up more than 3% or 342 points to end trading at 10,233.