M&A, healthy data help spur European stock gains

European shares rallied to their highest in about four-and-a-half months yesterday, boosted by mining stocks and a flurry of takeover news against a backdrop of solid German and US confidence data.

Endesa leapt after Acciona snapped up a stake and Hanson rose on hopes a bid would emerge for the building materials group. Securitas slumped after it went ex-rights to shares in two units.

"Both companies and venture capitalists have a lot of cash, so mergers are not something which are going to go away soon," said Philippe Gijsels, senior equity strategist at Fortis Bank.

"As long as the soft landing scenario holds, these levels are justified."

The pan-European FTSEurofirst 300 index closed up 1.4 per cent at 1,389.3, its highest since May 12, and is just 1.3 per cent shy of near-five year highs reached that month.

Indexes found support yesterday after the Ifo Institute's survey showed German business confidence was unexpectedly robust this month, and extended gains after stronger-than-expected US confidence data later in the session.

Spain's Endesa helped lead with an 11 per cent rise after Acciona snapped up a stake, and Germany's E.ON fell two per cent after it vowed to press on with its plans to buy the utility.

Also in the sector, Spain's Iberdrola added 2.9 per cent as dealers said construction group ACS was bidding for a 10 per cent stake in the power company.