European stock markets rallied strongly on Friday afternoon to close sharply higher on the day as hopes of a solution to the US financial mess increased.

The FTSE Eurofirst 300 closed 2.9 per cent higher at 1,088.65. Germany’s Xetra Dax climbed 2.4 per cent to 5,797.03 while the CAC 40 index in Paris gained 3 per cent to 4,080.75.