Merger activity helps propel Europe stock gains

European stocks nudged higher yesterday, propelled by a fresh bout of merger and acquisition activity and stronger oil shares as crude prices hovered around $66 a barrel.

Takeover talk sparked a rally in UK oil and gas company BG and Swiss biotech firm Serono, while A.P. Moeller-Maersk shares were pummelled after its results disappointed.

"The European market on the whole is quite fairly priced right now, but you have to take the M&A activity into account," said Philipp Musil, fund manager at Constantia Privatbank.

"I wouldn't invest fresh money right now, I'd wait to see what happens because the trigger is not the fundamentals."

The pan-European FTSEurofirst 300 index closed up 0.2 per cent at 1,367.53 points.

"There are some jitters in the short term, but it doesn't change the fundamental positive story," said Patrik Schowitz, global/European strategist at HSBC. "M&A is still there, and the growth indicators are phenomenally strong."

Oil heavyweights helped buoy the market, with BP and Royal Dutch Shell both up 0.8 per cent as crude oil traded around $66 a barrel on gnawing supply concerns.

BG ranked among the biggest gainers, climbing 4.3 per cent as traders reported talk US energy giant Exxon Mobil might be mulling a 900 pence per share offer.

This echoed recent talk that Exxon was looking at possible European acquisitions, including BG and Spain's Repsol.

Serono rose 3.5 per cent on talk that Japanese drug maker Astellas Pharma may be looking to acquire it after taking out a large loan. Astellas denied a media report that it has taken out a $8.6 billion loan for acquisitions.

Serono board member Sergio Marchionne renewed bid hopes at the weekend when he told a newspaper that doubts over the future of the group should soon be resolved. Serono has been looking for a buyer since November and has hired Goldman Sachs to help it explore alternatives.

Spain's Grupo Ferrovial rose 3.5 per cent after it recruited Australia's Macquarie Bank to its team attempting to buy British airports group BAA, heading off a potential rival bidder and boosting its firepower.