European markets are set to open strongly this morning after Wall Street recorded a late surge yesterday evening, bringing it above the record levels reached before the recent turbulence on international markets. The Dow Jones Industrial average of US shares ended 214.72 points higher at 9374.27 - a gain of 2.34 per cent - after a rise in the last hour of trading took it above the previous high of 9367.85, reached in July.

Earlier share prices on European markets rose sharply as confidence on both sides of the Atlantic was enhanced by a series of mergers and proposed mergers in Europe and the United States.

Stock markets in Europe were ahead by over two per cent while in New York, the Dow Jones rose sharply on a wave of merger news, including an $113 billion stock bid for AMP, the electrical equipment company, by Tyco and a proposed merger of internet companies AOL and Netscape. The Dow hit a new record close as confidence grew that the turmoil of recent months was over.

Earlier, the FTSE-0 index in London closed 130.9 points higher at 58484, a rise of 2.29 per cent. Germany's Xetra closed at 5024.51, up 113.08 from Friday, an increase of 2.30 per cent. And the CAC-40 in Paris hit a three-month high of 3845.81 after rising 43.11 points, or 1.13 per cent.

The Irish stock market was also over two per cent higher with strong demand in particular for the major financial shares.

Germany's biggest bank, Deutsche Bank lost most of its early gains which followed reports about a merger with Bankers Trust. After the official announcement by the two banks that they are in the advanced stages of negotiations concerning a potential cash merger Deutsche Bank shares fell quickly. They closed up 1.85 marks at 109.35.

In London, industrial groups BTR and Siebe were among the best-performing stocks in the Footsie, the former climbing 38 pence to 133 and the latter 28 to 243 after the duo jointly announced they are to merge and form BTR Siebe PLC, with a market capitalisation of around £7.6 billion sterling