European stocks and the euro surged on Monday largely on a report that the International Monetary Fund was in talks with Italy about a package to prop up the indebted country, traders said. The IMF denied the rumour but this did not stop major European indices rallying more than 3.0 percent and the euro rebounding back above $1.33 in early deals. Markets were also awaiting key bond auctions from Italy and France, as US rating agency Moody\'s warned that all European Union sovereign ratings were threatened by the current financial crisis. The OECD, which represents leading industrialised economies, was meanwhile preparing to publish its latest economic growth forecasts later on Monday. London\'s FTSE 100 stocks index jumped 1.87 percent in morning deals, while Frankfurt soared 2.90 percent, Paris surged 3.36 percent and Rome rallied 3.47 percent. The euro jumped to $1.3350 from $1.3240 on Friday in New York. \"The rally from a fundamental point of view is being assisted by rumours that the IMF are concocting some sort of elaborate bailout plan for Italy,\" said Simon Denham, head of Capital Spreads trading group in London. He added that stocks were also winning support from the \"eurozone stepping up a gear and exploring the idea of the ECB playing a critical role in sovereign debt intervention.\" A report on Sunday from the Italian newspaper La Stampa alleged that the IMF could bail out Italy with up to 600 billion euros ($800 billion) in aid. According to the report, the money would give Prime Minister Mario Monti a window of 12 to 18 months to implement urgent budget cuts and growth-boosting reforms \"by removing the necessity of having to refinance the debt.\" La Stampa said the IMF would guarantee rates of 4.0 percent or 5.0 percent on the loan -- far better than the borrowing costs on commercial markets, where the rate on two-year and five-year government bonds has gone above 7.0 percent. The International Monetary Fund denied the report in a brief statement issued on Monday. \"There are no discussions with the Italian authorities on a program for IMF financing,\" it said. The rumour meanwhile eased demand for the dollar and yen and pushed up the euro\'s value. \"The yen and US dollar have opened lower initially this week following another bout of rumours this weekend which have again renewed hope that a rescue package will soon be announced to dampen the escalating eurozone sovereign debt crisis,\" said Lee Hardman, an analyst at Bank of Tokyo-Mitsubishi UFJ. France had on Sunday warned that any problem with heavily-indebted Italy would affect the very heart of the eurozone. The statement from President Nicolas Sarkozy\'s office said: \"If there is an Italian problem, then it is the heart of the eurozone that is hit. It is up to Italy to do what it has undertaken to do.\" Sarkozy and German Chancellor Angela Merkel have said a debt collapse in Italy would be \"the end of the euro,\" Monti\'s press office said on Friday. Italy\'s 1.9-trillion euro public debt and low growth rate have spooked the markets in recent weeks, prompting concern that it could have to seek a bailout like fellow eurozone members Greece, Ireland and Portugal.