European stocks ended the last session of 2006 slightly lower in thin volumes, as both economic and corporate news dried up, but they notched up an impressive 16 per cent gain over the full year, fuelled by mergers and acquisitions.

The FTSEurofirst 300 of top European shares ended 0.3 per cent lower at 1,483.47 points, with the full-year rise in share prices less sharp than in 2005, when the index gained more than 22 per cent.

Among major regional indexes, Germany's DAX was the biggest gainer during the year, putting on 22 per cent, while France's CAC 40 rose 17.5 per cent and Britain's FTSE 100 gained just under 11 per cent.

"The key event during 2006 was the Fed going on hold (in August), the end of the tightening phase. Markets have rallied strongly since US interest rate expectations peaked," said Robert Parkes, a global strategist at HSBC.

The dollar fell 11 per cent against the euro in 2006, compared to a 13 per cent gain in 2005.

All the top benchmarks slowed during the year, held back by rate increases from central banks and the strong euro.

But Spanish stocks ended with an annual gain of nearly 32 per cent for the Ibex-35 blue chip index, far outstripping a gain of 18.2 per cent in 2005, fuelled by takeover fever in the energy sector.

Milan's S&P/MIB index of the top 40 shares ended up 16 per cent. Carmaker Fiat topped the table with a 97.7 per cent gain, closely followed by oil tubes and pipes maker Tenaris, which soared 94.7 per cent.

French stocks rose yesterday, led by utilities Suez and Gaz de France, which gained more than two per cent on reports of a planned bid by billionaire Francois Pinault for Suez.

Property firm Gecina climbed nine per cent ahead of its return to the Global Property Research 250 index.

The markets are set to head into a quiet first trading week in 2007, closing on Monday for the New Year holiday while US markets will be shut on Tuesday to mourn the death of former president Gerald Ford.

With the corporate agenda lean, investors will closely watch US non-farm payrolls data that were due yesterday and US and European manufacturing data due on Tuesday.

The US ISM manufacturing data may be delayed because of the national day of mourning.