European stocks rise as M&A talks offset telecoms

European shares closed higher yesterday as merger talk about a number of companies offset a weak performance of the telecoms and the mining sectors.

Among the top gainers were shares in Allianz, which rose 2.3 per cent after it reduced its stake in German retailer KarstadtQuelle and also announced it would cut its stake in reinsurer Munich Re to below 5 per cent, streamlining its portfolio.

The FTSEurofirst 300 index of top European shares closed up 0.29 per cent at 1,517.07 points.

"It is surprising how well the market responds to weak company results. This shows how strong the market is. We remain positive in the short term," Anne-Kristin Yasuda, a strategist at Landesbank Berlin said. Shares in European telecoms firms fell and topped losers in a strong broader market after Deutsche Telekom's second profit warning in six months highlighted the sector's woes. Europe's biggest telecoms group dropped 4 per cent.

Sven Krause, a fund manager at LBB Invest, said the fact that markets rose despite hefty losses at Deutsche Telekom was a sign for a generally good condition of the overall market. "We are overall confident," he said.

Business software maker SAP was lifted by market talk of bid interest from rival Oracle. SAP declined to comment.

MAN AG jumped 2.6 per cent after rumours that Swedish rival Volvo could bid for the truckmaker, dealers said.

Corus gained 0.4 per cent, after earlier in the day reaching its highest level since mid-March 2000, ahead of today's deadline for Tata Steel and Companhia Siderurgica Nacional (CSN) to modify their offers for the Anglo-Dutch steelmaker.

Bid speculation also boosted conglomerate Smiths Group by 2.7 per cent.

Britain's FTSE 100 was up 0.19 per cent, Germany's DAX was up 0.53 percent and the CAC 40 was up 0.67 per cent.

Among the major movers was German chipmaker Infineon, which rose 0.9 per cent after it gave a confident forecast for coming quarters and its phone-chip unit narrowed its operating loss by more than expected in the fiscal first quarter.

Falling copper prices dragged down mining stocks such as Kazakhmys, which fell 2.4 per cent. Antofagasta fell 0.9 per cent, and Xstrata dropped 1 per cent.