LONDON, June 6: Eur-opean stocks moved sharply higher on Wednesday, extending gains after recent heavy losses, on hopes EU leaders can keep Spain's stricken banking system afloat and the eurozone debt crisis at bay.

Dealers said Spain is the immediate concern amid conflicting views between a hardline Germany and other eurozone states ready for some flexibility on how to help Madrid to help its banks without resorting to a costly full debt bailout.

They said the gains came even though investors had been hoping for some lead on the economy from the European Central Bank which instead held its key interest rate and 2012 forecasts unchanged.

In London, the benchmark FTSE 100 index jumped 2.36 per cent to 5,384.11 points. In Frankfurt, the DAX 30 rose 2.09 per cent to 6,093.99 points and in Paris the CAC 40 gained 2.42 per cent to 3,058.44 points.

Other European markets showed similar gains, with Madrid up 2.41 per cent while Milan soared 3.50 per cent as the battered banks bounced back.

In New York, stocks opened higher as investors there also bought back in, albeit cautiously given the uncertain background as they picked up on a report that the US Federal Reserve might be ready for more stimulus measures.

The blue-chip Dow Jones Industrial Average was up 1.68 per cent at 1600 GMT and the tech-rich Nasdaq Composite gained 2.01 per cent.

The European single currency meanwhile rose sharply to $1.2547 from $1.2450 in New York late Tuesday. The euro hit $1.2288 last Friday, the lowest level since July 1, 2010, as markets were rocked by speculation that debt-plagued Spain could be forced into a bailout.—AFP