LONDON, Nov 29: European stocks mostly rose on Thursday, though winnings were less strong than in Asia and overnight on Wall Street, where gains were extended on hopes of another US interest rate cut to bolster the economy, dealers said.

London’s FTSE 100 index of leading companies climbed 0.17 per cent to 6,316.70 points in late morning trade. In Frankfurt the DAX 30 won 0.55 per cent to 7,765.87 points, while in Paris the CAC 40 dipped 0.07 per cent to 5,557.38.

European stock exchanges had risen strongly Wednesday, closing up almost three per cent in London. A sharp fall in oil prices also provided a boost to share prices, dealers said.

Mike Lenhoff, chief strategist at Brewin Dolphin stockbrokers, said markets could be gearing up for a year-end rally.

Equity markets are still technically oversold, he said Thursday.

In London, shares in British bank Alliance & Leicester jumped sharply as the group shrugged off the credit crunch by announcing a healthy funding outlook.

Alliance & Leicester was up by 14.32 per cent at 726.50 pence at about 1130 GMT.

In earlier Asian trade, dealers said worries over the US subprime loan crisis had receded although they stressed that the fallout from recent credit market turmoil was unlikely to have run its course.

Dealers took their cue from New York where the Dow Jones index surged 2.55 per cent Wednesday after comments from Federal Reserve vice chairman Donald Kohn lifted expectations of a US rate cut in December, dealers said.

Kohn said the central bank must be “nimble” in policy and should not hold the economy hostage to teach a lesson to financial market speculators.

If interest rates are going down that’s always good for markets as it lowers the cost of doing business, said Michael Heffernan, a private client advisor at Australia’s Austock Securities.

Interest rates are at the fulcrum of the seesaw and, depending on which way they swing, can determine where the market goes, he said.

The US rally gained steam after the Fed’s Beige Book report suggested the world’s largest economy is still growing but at a slow pace -- reinforcing the notion that the central bank may trim rates again, dealers said.

Stocks were also buoyed by a slump in oil prices after New York crude oil futures fell 4.0 per cent Wednesday, before rebounding Thursday.

World markets have been shaken in recent months by a US housing slump and related credit squeeze as American homeowners with patchy credit histories default on their subprime, or high risk, mortgages.

The rate cut hopes added to positive sentiment over news earlier in the week of a big investment in troubled banking giant Citigroup by Abu Dhabi investors.

Matthew Kwok, research head at Tanrich Securities in Hong Kong, said the rate cut hopes had provided a good reason for investors to buy after recent losses.

The dollar rose against the euro and yen as worries over the US mortgage crisis abated.

The New York stock markets rose sharply for a second day (Wednesday), making investors feel safe to buy dollars, said Nobuaki Tani, currency analyst at Resona Bank.—AFP