Eurostoxx 50: 2,248.78 (+69.36) Frankfurt DAX: 5,645.25 (+172.22) Paris CAC: 3,075.37 (+101.47):FRENCH FINANCIALS made large gains yesterday, as European equities continued their rally, driven by investor optimism that policy makers can effectively tackle Europe's debt crisis.

A decision by the European Central Bank to keep interest rates on hold at 1.5 per cent – though widely expected – briefly pared gains. But the FTSE Eurofirst 300 closed the day strongly, up 2.6 per cent to 940.65.

“We still expect the ECB to ease policy given the impending recession risks in the euro area, but we must reckon with that adjustment coming later rather than being more pre-emptive,” said Julian Callow at Barclays Capital.

France’s CAC 40 gained 3.4 per cent to 3,075.37.

Lender Natixis surged 9 per cent to €2.51, building on a 9.8 per cent gain in the last session, while BNP Paribas was up 8.6 per cent to €32.03. Société Générale gained 5.6 per cent to €20.69.

The outgoing ECB president, Jean-Claude Trichet, sought to calm investors’ concerns about the decision not to cut interest rates by announcing measures to boost liquidity in the euro zone’s banking system. Earlier speculation that the French government is working on a contingency plan to take stakes in the country’s banks – though rejected by a government official – also influenced market sentiment.

AXA rose 8.2 per cent to €10.50, after saying on Wednesday that it was fully committed to meeting its earnings targets by 2015.

Belgium’s KBC Groep added to a 15.4 per cent jump on Wednesday to climb 10.1 per cent to €18.91.

However, its rival Dexia suffered another torrid day, after recovering slightly in the last session from heavy losses on Tuesday. Its shares were suspended from trading in Paris and Belgium, at the request of the countries’ regulators, after plunging 17.2 per cent to €0.85.

Belgium is preparing to nationalise its arm of Dexia in an attempt to halt the bank’s sharp decline.

Meanwhile, Raiffeisen International endured a turbulent session. The Austrian bank dipped 2 per cent to €21.62.

Lufthansa edged down 0.1 per cent to €9.54 but Air France KLM was slightly up, climbing 0.3 per cent to €4.96. – (Copyright The Financial Times Limited 2011)