LONDON, Dec 18: Europe’s leading equity markets rallied on Tuesday, a day after world stocks had slumped on concerns about resurgent US inflation.

London’s FTSE 100 index of leading companies rose 0.90 percent to 6,334.30 points in late morning trade. Frankfurt’s DAX 30 jumped 1.08 per cent to 7,910.31 points and in Paris the CAC 40 gained 0.81 per cent to 5,559.51 approaching the half-way stage.

The DJ Euro Stoxx 50 index of top eurozone shares increased by 0.84 percent to 4,348.91 points.

The European single currency stood at $1.4408. It has been a better day ... with an expected bounce-back from Wall Street, said Mark Priest, head of equity sales at Tradindex.

Europe’s main indices had slumped by more than 1.5 per cent on Monday, mirroring a plunge by equities worldwide.

They said investors were nervous that growing inflationary pressures would limit the scope for further US interest rate cuts to ease a housing slump and related credit crunch.

The key word in these markets is volatility, with investors reacting to macro-economic data and momentum rather than fundamentals, said Isabelle Delattre from Raymond James Asset Management.

One day the market rises, with investors buying cyclicals and bank stocks and reducing positions in defensives, the next day recession and inflation concerns resurface and investors sell of cyclicals and buy utilities, she added.

Northern Rock, the British bank severely hurt by the credit crunch, saw its share price jump by 3.50 per cent to 94.6 pence Tuesday on London’s FTSE 100 index.

Its rally occurred as Britain’s Labour government agreed to extend its guarantee to all customer deposits held at Northern Rock.

The troubled mortgage lender was plunged into crisis in mid-September when it was forced to seek emergency help from the Bank of England.

This sent customers rushing to withdraw their savings, producing the first run on a British bank in living memory.—AFP