European stock markets closed sharply higher yesterday as investors chose to look on the bright side of mixed US data amid hopes the Federal Reserve will act to bolster the flagging economy if need be.

Dealers said the markets continue to see the Fed as offering a way out if the US economy slows further while US jobs and industrial orders data were taken as positive overall, showing some promise after the recent turmoil.

The euro was slightly easier as the dollar found some strength on the figures while gold slipped accordingly.

In London, the FTSE 100 index of leading companies gained 2.39 per cent at 5,394.53 points. In Paris, the CAC 40 jumped 3.07 per cent to 3,256.76 points and in Frankfurt the DAX advanced 2.50 per cent to 5,784.85 points.

Other European markets posted substantial gains, with Milan up more than 3.0 per cent and Madrid soaring 3.24 per cent as investors were cheered by Wall Street’s solid showing in late European trade.

In the foreign exchange market, the euro slipped to $1.44219 from $1.4437 in New York late Tuesday. The dollar fell to 76.49 yen from 76.70 yen.

Gold was at $1,813.50 an ounce, down from $1,825.

In New York, the blue-chip Dow Jones Industrial Average was up 0.67 per cent at around 1615 GMT, coming off early gains of more than one per cent, while the tech-heavy Nasdaq Composite added 0.41 per cent.

With investors waiting anxiously for the US employment report due tomorrow, figures from ADP showing private sector job gains of 91,000 in August, less than expected and down from 1009,000 in July, initially dented sentiment.

On consideration, the data appeared in a different light and “fit the sellable bill of being better than feared,” said Patrick O’Hare, an analyst with Briefing.com.

Additionally, a key reading of manufacturing in the Chicago area fell to 56.5 in August from 58.8 in July, holding above analyst forecasts and still above the boom-bust line of 50.