AFP - European stock markets rallied on Wednesday, with London striking a high for 2009, as investors digested the Bank of England's latest assessment on the recession-hit British economy.

The FTSE 100 index of top shares surged to 5,300.98 points -- last seen in late September 2008 -- before pulling back to 5,294.24 points in midday trade, up 1.22 percent from Tuesday's close.

Elsewhere, Frankfurt's DAX 30 soared 1.40 percent to 5,691.70 points and in Paris the CAC 40 jumped 1.20 percent to 3,832 after the half-way stage.

The DJ Euro Stoxx 50 index of top eurozone shares advanced 1.31 percent to 2,893.73 points.

The Bank of England warned on Wednesday that the strength of Britain's economic recovery from the country's longest recession on record was "highly uncertain" amid "sharply" rising inflation.

The "strength of the recovery" remains "highly uncertain," the central bank said in its quarterly economic report.

However, analysts said the study indicated that British interest rates would remain close to record low levels of 0.5 percent for some time.

"With central bankers unconcerned about inflation and anxious to keep wind in the sails of the recovery, investors know that rates are going to stay low," said analyst David Morrison at spread-betting firm GFT.

"That hurts the currency, but boosts equities and other assets," he added.

In addition, rising oil and metal prices also bolstered the energy and mining sectors, analysts said.

On the London Bullion Market, gold scored a record high of 1,117.83 dollars per ounce on the back of the weak greenback, which makes the precious metal cheaper for buyers holding stronger currencies and tends to lift demand.

"Mining stocks continued their march higher, as gold traded up over one percent in London to a new all-time high," added City Index analyst Nick Serff.

Wall Street had ended mixed in choppy trade on Tuesday with bouts of profit taking following a massive rally a day earlier.

The Dow Jones Industrial Average rose 0.20 percent to 10,246.97 points, another 2009 high, after a strong rally of some two percent on Monday.

A day after the rally stemming from a Group of 20 decision to maintain stimulus measures to hasten economic recovery from recession, investors were cautious with profit-taking evident from the opening bell.

But analysts said locking in profits after big gains was normal and pointed out that market sentiment remained bullish.

In Asia on Wednesday, Hong Kong shares soared 1.61 percent to a 15-month high as investors digested banking giant HSBC's latest trading update and mixed news from China.

Japanese stocks ended marginally higher on Wednesday after failing to sustain early gains sparked by upbeat economic data.