Europe's main stock markets rallied strongly yesterday, boosted by an election win for a business-friendly coalition in Germany and corporate takeovers in the United States, analysts said.

"The market welcomed this election" which saw Germany's chancellor Angela Merkel returned to office, raising economic optimism, said Frederic Rozier, a trader at Meeschaert Gestion Privee.

"The fact that there was a quite clear majority (for the ruling conservative chancellor) improves Merkel's capacity to maintain her policies" which have seen strong government measures to stimulate Europe's biggest economy, he said.

London's FTSE 100 index of leading shares closed 1.64 per cent higher at 5,165.7 points.

In Paris the CAC 40 index jumped 2.30 per cent to 3,825.00 points after falling on Friday. The DJ Euro Stoxx 50 index of top eurozone shares surged 2.37 per cent to 2,899.12 points.

Frankfurt's DAX index surged 2.78 per cent to 5,736.31 after the re-election on Sunday of Mrs Merkel, who set to work on a new centre-right coalition while warning Germans of hard work ahead to solve the crisis-stricken economy and other problems.

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