European stocks rally, gold soars amid eurozone turmoil

Another safe-haven instrument, the Swiss franc, has also surged and on Tuesday the Swiss central bank sprang a surprise, setting a target "peg" exchange rate against the euro.

The euro climbed to $1.4177 from $1.4109 in London late on Monday.

The Tokyo stock market slumped to a two-year low point and most other Asian markets tumbled, extending Monday's losses caused also by a dismal batch of US jobs data.

The US jobs figures raised concerns of a double-dip recession in the US economy, the biggest in the world and a key market for exports from Asia.

Before the resumption later in the day of trading on Wall Street after a long holiday weekend in the United States, traders were focused on the eurozone's debt crisis.

"Markets are in a dangerous phase with the eurozone debt and banking crisis bringing back memories of (the financial crisis in) 2008 at a time now when there are concerns about the health of the global economy," said VTB Capital economist Neil MacKinnon.

"Flight to safety themes are dominant in this environment."

Tens of thousands of workers were taking to the streets across Italy as the country's biggest union called a general strike against austerity measures by Prime Minister Silvio Berlusconi's government.

Spanish labour activists were also to march against their government's spending cuts.

"The deteriorating fiscal situation in Europe continues to spook investors, with continued political discord amongst EU leaders making the likelihood of a quick solution pretty nigh on impossible," said Michael Hewson, an analyst at trading group CMC Markets.

In early European stock market trading, London's benchmark FTSE 100 index rose 1.02 per cent to 5,153.23 points, Frankfurt's DAX 30 gained 0.43 per cent to 5,267.60 points and in Paris the CAC 40 won 0.50 per cent to 3,013.79. Madrid edged up 0.10 per cent and Milan was flat.

European stocks had slumped by about 4.0 per cent on Monday, with bank shares hit particularly hard.

Gold, seen as a safe bet in times of economic uncertainty, jumped on Tuesday to a record high price of $1,921.17 an ounce on the London Bullion Market.

The Swiss National Bank meanwhile set a minimum exchange rate of 1.20 francs per euro, saying the current value of the safe haven Swiss currency was a threat to the economy.

The Swiss franc has risen strongly in response to the eurozone debt crisis, hitting Swiss exporters and the tourism industry hard. The franc dropped by about 9.0 per cent in response to the announcement, and Swiss shares rallied strongly.

In a bid to get a firm hold of the debt problems, the head of the European Central Bank called on Monday for the immediate application of the latest rescue measures for and by Greece, and for new, tougher discipline in the way the eurozone is governed.

In a speech, Jean-Claude Trichet implored eurozone nations to tighten up the monitoring of economies.

Adding to strains in the EDuropean Union was news at the end of last week that the European Union and International Monetary Fund had left a critical audit of Greek finances unfinished saying more budget work was needed, while Athens admitted its deficit target was in trouble.

Further unsettling markets was news that German Chancellor Angela Merkel's Christian Democrats (CDU) suffered an election defeat in her home state on Sunday. Merkel, as the leader of the biggest EU economy, is a central voice in the eurozone crisis.