French banks, NY push European stocks higher

European blue chips held on to their gains yesterday afternoon as Wall Street opened up and the French banking sector was gripped by merger fever after Credit Agricole's friendly bid for Credit Lyonnais.

"At first glance the potential synergies look higher than expected," said Andrea Williams, head of European equities at Royal London Asset Management who is considering adding to her position in both Credit Agricole and BNP Paribas.

BNP Paribas, Credit Lyonnais' other ardent suitor, was sharply higher as investors expressed relief it was being shouldered out of a costly bidding war.

BNP Paribas rose 6.2 per cent, Credit Lyonnais was 2.4 per cent higher and Credit Agricole fell 4.6 per cent.

By 1435 GMT, the FTSE Eurotop 300 index of pan-European blue chips rose 1.1 per cent to 877 points, while the narrower DJ Euro Stoxx 50 index jumped 1.6 per cent to 2,468 points.

Some sell-side strategists said the market was looking attractive again now that shares had retraced about half of their 20 per cent bounce from October's five-and-half-year lows.

Strategists were also vying against each other for the best investment ideas for 2003.

Lehman Brothers suggested fund managers bias their portfolios towards producers such as Sage, Saipem and Rexam because "there is a real possibility that corporate expenditure on efficiency-enhancing technologies, outsourcing and other business services may have stabilised with some increase in the not too distant future".

On Wall Street, the Dow Jones industrial average was 0.5 per cent firmer while the tech-heavy Nasdaq Composite was 0.37 per cent stronger.

Among standout movers, shares in PizzaExpress jumped by a quarter after the British restaurant chain said it had received fresh takeover approaches, including one involving executive directors.

Shares in French tourism group Club Mediterranee were up two per cent after they were suspended following the company's announcement that its chairman would quit.

The heavily weighted energy sector also bolstered markets as an increasingly violent strike in Venzuela threatened to cut off exports to its key customer the United States.

BP was 2.2 per cent firmer, Royal Dutch was 1.3 per cent stronger and Shell added 1.1 per cent.