On Wall Street overnight, US stocks reacted positively to the Fed's quarter-point rate rise to 3.5 per cent and investors were relieved the central bank said it intended to keep future increases at a "measured pace". This left the Dow Jones Industrial Average up 0.8 per cent at 10,615.67, while the Nasdaq Composite ended 0.5 per cent higher at 2,174.19.

European stocks advanced to fresh three-year highs yesterday, paced by Commerzbank's renewed bid rumours surrounding the German bank, and as results from the region's insurers impressed. Commerzbank rose 7.1 per cent to ]21.46 as the rumour mill continued to grind. Speculation that BNP Paribas was about to make an offer drove the shares higher, although the French bank said it "never comments on market speculation" and other sources denied the bid.

By midday, the FTSE Eurofirst 300 was up 0.6 per cent to 1,196.45, while Frankfurt's Xetra Dax added 0.9 per cent to 4,954.77 and the CAC-40 in Paris gained 0.5 per cent to 4,514.74. London's FTSE 100 was up 0.3 per cent to 5,381, underperforming its continental peers as a number of stocks went ex-dividend.

Japan's Topix index of stocks - the index most commonly used by fund managers and equity strategists - rose to a four-year closing high yesterday, boosted by heavy foreign buying as fears over the fall-out from Japan's political upheaval eased. The Topix climbed 1.8 per cent to 1,227.85. The Nikkei 225 index rose 1.7 per cent to 12,098.08 - its highest close since April 2004.

Financial News compiled by Valletta Fund Management Ltd (Tel. 2122 7311) and BOV Stockbrokers Ltd (Tel. 2122 7370) members of the BOV Group.