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London - European equities rebounded sharply on Thursday on eurozone stimulus hopes, bright US data and a modest recovery in oil prices, dealers said.
However, the euro nosedived under $1.18 to reach the lowest level in more than nine years, hit by mounting speculation that the European Central Bank could launch quantitative easing to counter deflation.
Shortly after midday, London's benchmark FTSE 100 index rallied 1.68% to 6 527.70 points, as investors shrugged off news that the Bank of England held British interest rates again at a record-low level of 0.50%.
Elsewhere, Frankfurt's DAX 30 won 1.72% to 9 681.60 points and the CAC 40 in Paris soared 2.12% to 4 200.
"European stocks rallied ... on expectations of more aggressive stimulus measures in the eurozone, with major bourses in the black," said Atif Latif, director of trading at Guardian Stockbrokers.
In foreign exchange activity, the European single currency plunged to $1.1763 - the lowest level since January 3, 2006. It later stood at $1.1776.
"Optimism over more ECB stimulus may have helped equities but the prospect of further central bank easing was detrimental for the euro, which slid to a new nine-year low," said ETX Capital analyst Daniel Sugarman.
Tesco surges
Back in London, Britain's biggest retailer Tesco topped the risers board as the supermarket chain unveiled a new restructuring aimed at reviving its fortunes.
The group, which did not outline potential job losses, will overhaul central overheads to deliver $377m of savings per year.
Tesco shares spiked 10.91% to 201.85 pence, but it also revealed sliding sales in the key Christmas trading period.
"Tesco is leading the FTSE 100 leader board after announcing a series of cost-cutting measures to turn the troubled retailer around," noted IG analyst David Madden.
On the downside, clothing-to-food retailer Marks and Spencer topped the fallers board, sinking 4.66% to 441.60 pence.
M&S sales slid 1.6% in the 13 weeks to December 27, as clothing was hit by unseasonably warm autumn weather in the third quarter.
European equities had bounded higher on Wednesday as weak eurozone inflation data sparked speculation the European Central Bank (ECB) will undertake additional stimulus measures.
Investor sentiment was bolstered as data showed consumer prices in the eurozone fell in December for the first time since October 2009, at the height of the financial crisis.
The news, raising fears the bloc is about to slip into a deflationary spiral, fuelled expectations the ECB will embark on a vast bond-buying programme known as quantitative easing (QE).
Asia, US stocks up
Asian equity markets mostly rallied on Thursday on strong US data and ECB stimulus hopes, while oil prices staged a slight rebound following recent sustained heavy losses.
Confidence was given a much-needed boost by minutes from the US Federal Reserve's December meeting suggesting the world's most powerful central bank will not hike interest rates before April.
Tokyo surged 1.67% as the yen gave up recent gains against the dollar, while Hong Kong rose 0.65%, Sydney climbed 0.52% and Seoul advanced 1.11%.
However, Shanghai tumbled 2.39% on profit-taking.
This week's advances come as welcome relief for global markets, which have been hammered by a slump in oil prices and growing fears that Greece could exit the eurozone as an anti-austerity party looks set to win this month's general election.
Wall Street stocks jumped on Wednesday after solid US economic data, ending a five-day losing streak, with the Dow Jones Industrial Average surging 1.23%.
US shares were also helped by data showing the trade deficit shrinking sharply to its smallest size in nearly a year and the private sector adding a higher-than-expected 241 000 jobs in December.
Minutes from the Fed showing it remains on course to raise interest rates in the first half of this year also supported the dollar against the euro by highlighting the divergent monetary policy between Europe and the US.
