Miners, M&A, US data pull European shares higher

European shares rose more than half a per cent yesterday, bouncing back from losses late last week, lifted by mining stocks, merger and acquisition activity and data suggesting the US housing market was stabilising.

The dollar rebounded from a 20-month low against the euro, providing some relief for dollar-earning European exporters, and the oil price fell by more than $1 per barrel.

The FTSEurofirst 300 index closed unofficially at 1,429.72 points, up 0.6 per cent, taking its cue in late trade from a robust Wall Street where the S&P 500 advanced to stand 0.6 per cent higher at 1700 GMT, helped partly by a slower year-on-year decline for the US pending home sales index.

"It's all thanks to Wall Street," said a dealer in Frankfurt, adding that European volumes had been thin as many investors had begun to close their books for the year.

The index had dipped nearly four per cent in the past two weeks as a rally in the euro and weak US economic data sparked a market correction, which many strategists deem healthy after European markets had leapt 20 per cent from their June 2006 lows.

In European M&A action, Premier Foods rallied 4.7 per cent after it agreed to buy RHM for 1.2 billion pounds ($2.4 billion) to create Britain's biggest food producer and put it in a stronger position to stand up to the country's powerful supermarkets.

RHM shares leapt 31.5 per cent. The deal lifted other companies in the sector, with Cadbury Schweppes up two per cent on revived hopes it may be a target for consolidation.

Hopes of bids from a group of Italian investors for Alitalia sent shares in the carrier up 2.4 per cent, while music group EMI rose 1.5 per cent following a newspaper report that it may reject a potential 2.5 billion pound ($4.9 billion) bid from private equity firm Permira as being too low.

French engineering group Alstom rose three per cent, extending a string of positive sessions, after conglomerate Bouygues increased its stake above 25 per cent.