European equities rebounded sharply Thursday, buoyed by a wave of optimism that the ECB will take new stimulus measures soon and bright data on the US economy, analysts said.
London's benchmark FTSE 100 index rallied 2.34 percent to end the day at 6,569.96 points, as investors shrugged off news that the Bank of England held British interest rates again at a record-low level of 0.50 percent.
In Paris the CAC 40 soared 3.59 percent to close at 4,260.19 points, while Frankfurt's DAX 30 index shot up 3.36 percent to 9,837.61 and Milan's FTSE Mib jumped 3.69 percent.
"Shares in Europe have once again rallied strongly as expectations of continued low rates and an improving US economy help underpin risk appetite," said Jasper Lawler, market analyst at CMC Markets.
However, the euro nosedived under $1.18 to reach the lowest level in more than nine years, hit by mounting speculation that the European Central Bank could launch quantitative easing to counter deflation.
The European single currency plunged to $1.1754 -- the lowest level since the beginning of December 2005. It later stood at $1.1810.
"Optimism over more ECB stimulus may have helped equities but the prospect of further central bank easing was detrimental for the euro, which slid to a new nine-year low," said ETX Capital analyst Daniel Sugarman.
- Tesco surges -
Back in London, Britain's biggest retailer Tesco topped the risers board as the supermarket chain unveiled a new restructuring aimed at reviving its fortunes.
The group, which did not outline potential job losses, will overhaul central overheads to deliver £250 million ($377 million, 319 million euros) of savings per year.
Tesco shares skyrocketed nearly 15 percent to close at 209.25 pence, although it also revealed sliding sales in the key Christmas trading period.
On the downside, clothing-to-food retailer Marks and Spencer topped the fallers board, sinking 3.52 percent to close at 445.90 pence.
M&S sales slid 1.6 percent in the 13 weeks to December 27, as clothing was hit by unseasonably warm autumn weather in the third quarter.
The Milan market got a boost from bank shares after speculation mounted that a domestic or foreign bank may try to take over troubled Monte dei Paschi bank, possibly by giant Spanish bank Santander, which made a surprise announcement Thursday that it is seeking to raise 7.5 billion euros in fresh funds.
BMPS shares soared 12.4 percent to 0.52 cents.
European equities had bounded higher Wednesday as weak eurozone inflation data sparked speculation the European Central Bank (ECB) will undertake additional stimulus measures.
Investor sentiment was bolstered by data showing consumer prices in the eurozone fell in December for the first time since October 2009, at the height of the financial crisis.
The news, raising fears the bloc is about to slip into a deflationary spiral, fuelled expectations the ECB will embark on a vast bond-buying programme known as quantitative easing (QE).
And in a rare glimmer of good news, data released Thursday showed eurozone retail sales rose by 0.6 percent in November compared with October.
- US, Asia stocks up -
US stocks were up in midday trading in New York Thursday following a drop in new jobless benefits claims that pointed to a further strengthening of the world's top economy.
The Dow Jones Industrial Average rose 1.64 percent to 17,877.48 points, while the broad-based S&P 500 surged 1.61 percent to 2,058.55 and the tech-rich Nasdaq Composite Index gained 1.83 percent to 4,730.84.
US stocks had jumped Wednesday after solid US economic data, snapping a five-day losing streak.
Asian equity markets mostly rallied Thursday on the strong US data as well as ECB stimulus hopes, while oil prices staged a slight rebound following recent sustained heavy losses.
Tokyo surged 1.67 percent as the yen gave up recent gains against the dollar, while Hong Kong rose 0.65 percent, Sydney climbed 0.52 percent and Seoul advanced 1.11 percent.
However, Shanghai tumbled 2.39 percent on profit-taking.
This week's advances come as welcome relief for global markets, which have been hammered by a slump in oil prices and growing fears that Greece could exit the eurozone as an anti-austerity party is leading in the opinion polls ahead of the January 25 election.