European stock markets surged Tuesday as trading came to an end, buoyed by the release of better-than-expected results from two leading Wall Street investment banks and a solid performance by stocks on Wall Street. The New York share exchange's rise combined with earnings from Goldman Sachs and Lehman Brothers helped European bourses to claw back the heavy losses run up at the start of the week when a new wave of fear about the US economic outlook sent global markets plunging. Europe's key blue-chip Euro Stoxx 50 index was up more than 4 per cent at 2,987 as Tuesday's trading drew to a close following a more than 2 per cent gain on Wall Street and the release of the results from Goldman Sachs and Lehman Brothers. The Stoxx 50 increase was mirrored across national European bourses with banking stocks helping to spearhead the increase in shares. While Europe's premiere stock market in London was trading up 3.4 per cent at 5595.90, with stocks in Zurich, Paris and Frankfurt also adding more than 3 per cent. Tuesday's share trading also formed part of the buildup to a US Federal Reserve's meeting Tuesday, which is expected to result in the US monetary authorities delivering what markets hope will be an economic confidence building 1-percentage-point rate cut. This would be the Fed's biggest reduction in borrowing costs in about a quarter of a century. In a bid to shore up the US banking and finance sector, the Fed launched a new round of emergency moves at the end of last week. However, it was the weekend announcement of JP Morgan Chase's hastily pieced together government-backed takeover of another leading Wall Street investment house Bear Stearns which sent shock waves across global markets this week. At the same time, looming large over the world's share markets has been the surge in oil prices which charged ahead by 2.6 per cent to 106.91 dollars a barrel in European trading Tuesday. Linked to the continuing rise in oil prices has been the slump in the dollar which slipped again in trading Tuesday as it headed back towards the all-time low it hit against the euro earlier this week of just short of 1.60 dollars. Apart from worries about the US's economic prospects, the euro is also gaining strength from the Fed's moves to slash rates at a time when the European Central Bank is sending out signals that it is in no rush to follow the US monetary authorities and trim borrowing costs. Investor nervousness about the economic outlook also helped to keep the upward pressure on gold prices, which gained more than 1 per cent to rise to more than 1,011 an ounce Tuesday. "We are facing one of the largest financial crises of recent decades," said German Finance Minister Peer Steinbrueck said, warning that the financial turbulence was spilling over into the real economy in countries outside the United States. Speaking in Frankfurt late Monday, Josef Ackermann, the head of Germany's largest bank, Deutsche Bank, said the markets were unable to resolve the crisis on their own. He called on governments to become involved to calm markets, in coordination with central banks and the private banking sector.
