European stocks extend five-year highs

European share indexes closed up for a seventh straight session yesterday to extend five-year highs, with Swedish truckmaker Scania jumping after German rival MAN raised its bid.

The complicated Scania saga is the latest in a number of takeover stories, spurred by healthy corporate earnings, which have been key drivers in European stocks recovering from May and June's sharp correction sparked by inflation worries.

The FTSEurofirst 300 index of top European shares unofficially closed up 0.77 per cent at 1,436.34, its best level since June 2001. Its rise over the past seven sessions has been around three per cent.

The narrower DJ Euro Stoxx 50 and the wider DJ Stoxx 600 both rose 0.8 per cent, extending gains after the US market's Dow Jones industrial average hit new record highs thanks to upbeat corporate earnings.

MAN, now controlling 14.3 per cent of Scania's voting rights, said it was increasing its cash-and-stock offer by over seven per cent to €51.29 or 475 crowns per Scania share, valuing the Swedish company at €10.3 billion.

Scania rejected the revised offer, having also rebuffed friendly merger advances that would create Europe's leading truck maker.

Scania shares soared 11 per cent, also helped by record quarterly results announced ahead of schedule and a bullish 2006 profit outlook.

"We view the release of preliminary Q3 results... as an attempt to preserve Scania's independence," HVB analyst Jochen Schlachter said.

MAN rose four per cent while stock in Scania shareholder Investor also gained despite the investment vehicle saying it did not rule out Scania making a counterbid for MAN.

Meanwhile traders said shares in Societe Generale rose 4.2 per cent amid market speculation Citigroup could be poised to bid for the French bank.

SocGen had gained earlier in the session on persistent talk of a tie-up with Spain's BBVA, whose shares added 1.4 per cent.

French utility Suez rose after a newspaper report that tycoon Francois Pinault was prepared to scupper a merger between Suez and Gaz de France by inviting Italy's Enel to bid for Suez.

"It's a credible option... even if it is politically sensitive," CM-CIC Securities analyst Patrice Lambert de Diesbach, said in a research note. "It should not change anything except make the French government understand the true value of Suez."

However, Suez shares halved earlier gains to be up 1.8 per cent after Enel said the prospect of a deal was no longer valid.

SocGen and Suez helped France's CAC 40 index gain 0.9 per cent while Britain's FTSE 100 added 0.8 per cent to its highest close in six months while Germany's DAX rose 0.7 per cent.

On the downside in France, car maker Peugeot dipped after Goldman Sachs cut its rating on the shares to a "sell" and retailer Carrefour lost one per cent on concerns its profit margins might take a hit from fierce competition.

Carrefour said at its third-quarter sales presentation on Wednesday after the market closed that it had only slightly passed on higher supplier invoices to its shoppers.

In the same sector, Germany's Metro AG denied rumours of a profit warning, saying that nothing had changed in its forecasts.

Metro shares fell 2.4 per cent before trimming losses on the statement.