Retailers push Europe stocks up

European shares edged up yesterday to end at their highest point in more than two weeks, buoyed by retailers and a batch of takeover rumours ahead of the Federal Reserve's interest rate decision.

Nordea, Sampo, ICI and Remy Cointreau were all boosted by takeover speculation, while lacklustre oil and mining stocks limited gains.

"The mood is still fairly optimistic. Going into the end of year, perhaps one shouldn't be overweight in the more cyclical area of the market as the visibility on the US economy has decreased," said Jan Leroy, fund manager at Petercam Asset Management.

"Everyone will watch the Fed comments but otherwise I guess it will be more of a non-event."

The pan-European FTSEurofirst index of 300 leading shares closed up 0.4 per cent at 1,462.5 points.

Across Europe, the FTSE slipped 0.1 per cent, while Germany's DAX added 0.1 per cent and France's CAC 40 ended flat.

Investors were on tenterhooks ahead of a Fed monetary policy meeting, at which US central bankers are expected to hold interest rates steady and retain a cautionary warning about inflation risks, while taking stock of cooler economic growth.

Economic data showing higher-than-expected German investor sentiment and British inflation at its highest last month since comparable records began a decade ago, added to expectations UK and euro zone rates would rise further.

"The German recovery is broadening and business confidence is looking much more solid. The ZEW index will be seen as another piece of the jigsaw for higher ECB rates ahead," Bear Stearns economist David Brown said in a note.

Netherlands-based retailer Ahold led European food retailers higher with a 3.9 per cent rise on expectations of better Christmas trading than anticipated and a higher valuation of its assets. Elsewhere, Marks & Spencer added 1.8 per cent, while Tesco gained one per cent and Carrefour added two per cent.

Telecom stocks also helped buoy the market, with Vodafone up two per cent and BT trading 1.6 per cent higher as some investors rotated funds into the sector.

Commodity-related stocks weighed, despite firm oil and metals prices as some traders cited the entry into force in Algeria of a windfall tax on foreign resource companies, which will likely affect their rate of return.

Shares in BP and Total, both invested in the North African country, fell by 0.7 and one per cent respectively. BHP Billiton fell 1.6 per cent.

In takeover developments, Nordea rallied 6.7 per cent after news Finland's Sampo raised its stake in the Nordic bank sparked renewed speculation it may be eyeing the 19.9 per cent stake owned by the Swedish state.

Sampo shares ended up 3.1 per cent. ICI shares gained 2.9 per cent on continued bid talk, with traders citing Akzo Nobel as a likely buyer because of the strategic fit in paints.