Miners, M&A push European shares near six-year peaks

European stocks started the week on a positive note, approaching six-year highs as oil, mining and financial shares rose and merger activity continued to bubble away.

Among the biggest movers, Smiths Group rallied after agreeing to sell its aerospace unit to General Electric, while Tandberg Television surged after Arris made a bid for the digital broadcast systems maker.

"I am not surprised by the strength in equity markets. You still have liquidity in excess, interest rates that are low, a record number of mergers and acquisitions and not that many alternative investments to make," said Jacques-Antoine Bretteil, fund manager at International Capital Gestion in Paris.

"That said, the stock market euphoria probably does not reflect fundamentals of a global economy under pressure and corporate earnings that will be less stellar this year."

The FTSEurofirst 300 index of leading European shares was 0.5 per cent higher at 1,517.19 points by 1146 GMT, bringing its gains since the start of the year to 2.3 per cent.

Volumes were relatively light, with US markets closed for a holiday to mark Martin Luther King Day, and little in the way of corporate or economic news.

After a faltering start to the year, European shares have been boosted by stronger-than-expected US economic figures and comments by the head of the European Central Bank that quelled worries about aggressive monetary tightening.

A 13 per cent dip in oil prices, and a two-per cent rebound in the dollar against the euro also helped sentiment.

Around Europe, London's FTSE 100 was 0.4 per cent higher, while Paris's CAC 40 was up 0.1 per cent and Frankfurt's DAX had gained 0.3 per cent.

Energy stocks led the market's march up after oil traded just shy of $53 a barrel amid growing expectations of another cut in OPEC production, with Total up 0.6 per cent, and Royal Dutch Shell one per cent higher.

Basic producers also lent support as steady metals underpinned Anglo American and BHP Billiton. Indian-focused miner Vedanta Resources added 2.6 per cent after a sharp rise in quarterly profit.

Financial services stocks also headed higher, buoyed by a 4.8 per cent rise in Deutsche Boerse that traders attributed to a technical bounce.

Takeover activity added to the positive tone, with Tandberg up 14 per cent after US Arris group made a $1.2 billion cash and share bid for the Norwegian company, which recommended its shareholders accept the offer.

Britain's Smiths Group jumped 15 per cent to a record high after GE agreed to pay $4.8 billion cash for its aerospace business.