The Dow Jones surged by over 100 points on the second day running, yesterday, almost regaining the 247.37 points it lost on Friday. The rise will provide further support for European markets when they open this morning.

Earlier, share prices had rebounded on stock markets all over the world as the fear of interest rate rises in the United States and Germany faded. The Irish stock market was almost 1 per cent higher after the heavy losses of Monday and last Friday, while the FTSE 100 Index closed over 79 points higher on 4914.2.

European markets were also firmer after Wall Street opened on a strong note and, as European markets closed, the Dow Jones was trading 65 points higher.

At the close in New York, the Dow was up by 114.74 at 7,918.10 points.

The decision by the American Federal Reserve to hold interest rates at current levels and a clear indication by the Bundesbank that it sees no reason to raise German rates tomorrow gave investors the confidence to go back into the market to buy stock.

But market sources warned that, given the scale of the rises in international share prices over the past year, another "correction" on the scale of last Friday's 3 per cent fall on Wall Street is likely. "With markets at these levels, even a modest bit of profit-taking will send prices down sharply," said one source.

Yesterday, the Bundesbank kept its key repo money market unchanged at 3 per cent and effectively killed off talk of an interest rate rise when it announced a sharp slowdown in the M3 money supply growth figure, the bank's key monetary policy guide.

The news convinced financial markets the Bundesbank is unlikely to raise key interest rates when its council meets tomorrow, for the first time after a four-week summer break. "This is very nice for the Bundesbank because it means it can hold off on an interest rate move for the time being," said Mr Gerhard Grebe, chief economist at Bank Julius Baer in Frankfurt. "They can have a relaxed Bundesbank meeting."