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London - Global stock markets surged in a "Santa Claus rally" on Thursday as dealers welcomed the outcome of the US Federal Reserve meeting which signalled an interest rate increase was not imminent.
Oil prices also rose strongly after recent volatility but retreated later in the day, while the euro fell to $1.2289 from $1.2343 late on Wednesday in New York.
In Europe, London's benchmark FTSE 100 index closed up 2.04% to 6 466 points as investors welcomed British retail sales rising strongly in November as shoppers snapped up bargains.
Among other European exchanges, the Paris CAC 40 jumped 3.35% to 4 249.49 points, while in Frankfurt the DAX 30 was up 2.79% to 9 811.06 points.
Germany's outlook was boosted by data showing business confidence in Europe's biggest economy rose again in December.
Markets are "awash with positivity, following oil's creep above $60 per barrel, the US Fed showing faith in the US economy, and the Swiss Central Bank slashing its interest rates", said Connor Campbell, analyst at traders Spreadex.
The Fed on Wednesday left its key interest rate, the federal funds rate, at the 0-0.25% level, where it has been for six years to help the US emerge from deep recession.
The US central bank left in place market expectations that it may begin raising interest rates only in the middle of 2015, downplaying speculation that a hike might come earlier because of the strength of the US economy.
The outcome of the meeting stoked talk of a "Santa Claus rally", and US traders continued to be in a festive mood on Thursday.
In midday trading, the Dow Jones Industrial Average stood at 17 618.75, up 1.51%. The broad-based S&P 500 rose 1.53% to 2 043.75, while the tech-rich Nasdaq Composite Index gained 1.55% to 4 716.51.
Asian markets also mostly rallied, with investors reversing a recent sell-off.
Early gains in oil prices were however later wiped out as concerns over a supply glut persisted.
US benchmark West Texas Intermediate for January delivery fell 40 cents to $56.07 by 17:30 GMT. Brent North Sea crude for February dropped 60c to $60.58 per barrel.
A fresh drop in oil prices earlier this week had sparked turmoil on global stock markets where investors were concerned about the effect on oil firms as well as the crude-dependent economy of Russia.
Russia, a key oil producer which does not belong to Opec, is also straining under Western sanctions over Ukraine.
Russian President Vladimir Putin however sought to allay fears of economic collapse, saying Thursday the downturn would last two years at most.
Saudi Arabia, the largest producer in the Organisation of the Petroleum Exporting Countries (Opec) oil cartel, cannot reduce its output if it wants to maintain its market share, the kingdom's oil minister said on Thursday despite plunging prices.
Ali al-Nuaimi added that commodity price fluctuations are to be expected, and he expressed optimism for the future despite crude's price drop of about 50 percent since June.
"It is difficult, or even impossible, for Saudi Arabia or Opec to undertake any measure that would lead to a reduction in (their) share of the market and an increase in that of others" who do not belong to the cartel, he was quoted as saying by the official Saudi Press Agency.
"Price fluctuations in commodities, including oil, are normal," the minister added.
He said he is "optimistic for the future because the situation that we and the world currently face is temporary."
Crude prices traded above $100 a barrel earlier this year but have slumped to multi-year lows since June in the face of a global supply glut, a strong dollar and slower growth in demand.
Prices plunged even further after Opec decided last month against cutting production.
The cartel pumps about 30% of global crude.
Switzerland's central bank meanwhile announced on Thursday it was introducing negative interest rates to stop the franc getting any stronger, after the Russian ruble crisis sent investors pouring their investments into the safe haven currency.
The British pound meanwhile rose to 78.44 pence per euro and $1.5669, while gold was also up slightly at $1 199 per ounce.
