European stock markets rally after Tokyo bounce

LONDON, March 8, 2007 (AFP) - European stock markets moved higher on Thursday, following bumper gains earlier in Tokyo, as investors regained confidence after a recent slump in global equities, dealers said. However, trading was cautious ahead of crucial interest rate decisions from the European Central Bank (ECB) and the Bank of England (BoE).

London's FTSE 100 index of leading shares rose 0.74 percent to 6,201.96 points in early morning deals, Frankfurt's DAX 30 added 0.71 percent to 6,664.44 and in Paris the CAC 40 gained 0.

76 percent to 5,496.76 points. The DJ Euro Stoxx 50 index of eurozone blue chip shares won 0.86 percent to 4,056.42 points.

The euro stood at 1.3148 dollars.

While the ECB was forecast to hike euro zone rates to 3.75 percent, the BoE was expected to hold British borrowing costs steady at 5.25 percent -- but some analysts refuse to rule out a surprise hike.

Higher interest rates are a key factor for borrowers because they feed through into higher debt repayments -- and increase the cost of capital for companies.

Japanese share prices closed up nearly 2.0 percent Thursday, topping 17,000 points for the first time in four trading days on rising investor sentiment