Europe’s main stock markets rose yesterday following strong gains across Asia on China holding rates steady and takeover activity involving the energy and pharmaceutical industries. In London, the FTSE 100 index climbed 0.82 per cent to 5,860.75 points and in Frankfurt the DAX rose 0.33 per cent to 7,029.39 points, its highest close of the year.

In Paris, the CAC 40 advanced 0.91 per cent to 3,892.44 points.

European stocks followed Asian markets higher, which rose on China holding interest rates steady despite official data showing accelerating inflation.

Traders feared that a rise in Chinese interest rates would slow growth, dragging global trade down with it. Shanghai’s Composite index jumped 2.88 per cent, its best one-day percentage gain since October 15, to 2,922.92 points, while Hong Kong’s Hang Seng rose 0.67 per cent to 23,317.61 points.

Tokyo ended up 0.80 per cent at 10,293.89, while Sydney’s S&P/ASX 200 rose 0.23 per cent to 4,757.1.

“Investor sentiment has received a shot in the arm... with a slew of merger and acquisition activity, as well as clarity on Chinese monetary policy which doesn’t include an interest rate hike,” said Joseph Hargett of Schaeffer’s Investment Research. Over the weekend China’s leaders pledged to ensure “stable and healthy” economic development and to manage inflation expectations in an “active and stable way” in 2011, but held off on an immediate interest rate hike despite inflation topping five percent for the first time in more than two years.

On Wall Street, the Dow Jones Industrial Average climbed 0.31 per cent to 11,445.40 by midday, while the S&P 500 index, a broader measure of the market, rose 0.38 per cent to 1,245.10.

The tech-rich Nasdaq was up 0.08 per cent at 2,639.64.

Elsewhere in Europe, Amsterdam advanced 0.31 per cent, Brussels put on 0.34 per cent, Madrid added 0.29 per cent, Milan rose 0.72 per cent, Lisbon climbed 0.57 per cent and Swiss stocks were flat.