The two big financial mergers excited hopes of further Europe-wide sector consolidation yesterday, helping stocks rise and lifting blue chips. A firm start on Wall Street and speculation over interest rate cuts gave stocks further support but pushed the euro to a record low against the dollar.

The Dow was up 30 points, or around 0.3 per cent, as European trading drew to a close and London, Paris and Frankfurt indices all ended well into positive territory. The FTSE closed 1.97 per cent higher but off its earlier peaks, hit amid expectations of a strong showing on Wall Street. In Dublin trading was quieter and the ISEQ index added 0.75 per cent. In the currency markets, bears were out in force, with mounting pessimism about European economies expected to drive the euro to fresh lows against the dollar. Speculation that the European Central Bank will have to cut interest rates soon to foster growth drove the euro below $1.13. While the strength of US economic expansion has meant euro weakness was most pronounced against the dollar, it also fell nearly 2 per cent against the yen and was poised on the brink of new lows against sterling.