LONDON (AFP) - European equities edged higher Thursday after British bank Lloyds TSB agreed a takeover deal for rival HBOS, and as investors grappled with a major central bank plan to boost liquidity.

Despite the modest gains, economic storm clouds continued to threaten markets after a week that saw the collapse of US bank Lehman Brothers, the sale of Merrill Lynch and the rescue of insurer AIG.

In Asia on Thursday, stocks plunged as the global financial crisis deepened amid fears that more banks will go under.

In Europe, London's FTSE 100 index of leading shares rallied 1.13 percent to 4,967.90 points. However, the FTSE had collapsed by almost 10 percent in value during the first three days of the week.

In Paris, the CAC 40 won 0.57 percent to 4,022.85 points and Frankfurt's DAX 30 added 0.24 percent to 5,874.77.

The DJ Euro Stoxx 50 index of leading eurozone shares increased by 0.50 percent to stand at 3,033.84.

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