HOPES that the continuing gloom in Europe will spur central banks into further stimulus measures triggered a rally on world markets.

Meanwhile, a multibillion- pound merger involving Alliance Boots helped put the retail sector on the front foot.

The FTSE-100 index rose 95.2 points to 5586.3 as traders speculated that the US Federal Reserve will pump more money into the economy at its meeting this week, while a fall in inflation to 2.8% gave the Bank of England more leeway to act.

Pressure on central banks to boost their economies comes as Greece struggles to form a coalition government following the weekend's elections, while traders expect it to seek to renegotiate its bailout deal, prompting more worries about its exit from the eurozone. Meanwhile, Spain was hit with rising borrowing costs, reflecting fears it may need a fully fledged bailout.

Further evidence that the eurozone crisis is hurting the global economy emerged as US employers in April posted the fewest job openings in five months, while Germany saw investor confidence drop at its fastest rate since 1998.

The euro rose on currency markets as it regained some of its recent falls. The pound was down against the single currency at 1.24 but was up against the dollar at 1.57.

Alliance Boots exited the London market in 2007 in an £11 billion private equity deal, but it still managed to excite investors by announcing a strategic partnership with US counterpart Walgreens.

The owner of Duane Reade is to pay $6.7bn (£4.3bn) for a 45% stake in Alliance Boots, with an option for the rest in three years.

Elsewhere in the retail sector, Premier Inn and Costa coffee chain owner Whitbread was the biggest riser in the top flight after impressing investors with a 4.5% rise in first quarter like-for-like sales.

The shares have risen 8% over the last three months, during which time the wider FTSE-100 index has lost 8%, and were up by another 118p to 1967p yesterday.

There was also a much-needed boost for Home Retail Group after strong sales of laptops and tablet computers helped Argos post flat like-for-like sales in the last quarter, ahead of City expectations of 4%.

Rival Kingfisher, which owns B&Q, benefited in the top flight with a rise of 10.7p to 284p, while Marks & Spencer was 9.6p higher at 335.6p.