EUROPEAN shares followed US stocks higher again yesterday when Wall Street took a positive view of a key economic indicator showing that the world's number one economy was still generating new jobs at a stunning rate.

US non-farm payrolls rose by a huge 339,000 in February, the most since May. Economists had expected a 230,000-job gain.

"The numbers were unambiguously strong [but the report is]... not going to prompt a March move [to tighten US interest rates]," Mr Wayne Ayers, chief economist at the Bank of Boston, said.

Share traders on both sides of the Atlantic fear that a move by the US Federal Reserve to raise interest rates to cap inflation could sorely test a global bull market in shares which has seen prices surge to record after record recently.

"This report does not change things dramatically in terms of Fed policy. The main strength was in construction tied to mild weather. The hourly earnings data - up three cents to 512.09 in February - didn't cause much of a scare," Mr David Sloan, senior economist at IDEA Inc, said.

The benchmark 30-year US Treasury bond fell immediately after the report but then rebounded, adding a third of a point. Its yield eased to 6.86 per cent from 6.88 per cent, giving the green light to further gains for US shares.

At the close of business, the Dow Jones index of blue-chip shares was up 56.19 points at 7,000.89.

In London, the FTSE index closed up 21 points at 4,420.3, a new record close, while in Paris the CAC-40 index was up 9.36 points at 2,708.28, which was also a new record close.

In Dublin the ISEQ index rose slightly to reach a new closing high of 3049.63.

But some strategists said that both the US and British markets could come under pressure in the near term as fears grow of fiscal tightening in both countries. Higher interest rates would be bad news for share prices by making the cost of borrowing more expensive for companies and alternative investments more attractive to investors.

Any sell off in US shares, which are at record levels, would also undermine European stock.

"The first reaction to figures is usually the wrong one, wamed Mr Richard Kersley, strategist at BZW. However, the day's bullish mood was captured by one London trader who said: "With the Dow now looking like it could set a new record, some people are taking the view that they'd better fill their boots [with shares]."