European stocks hit new six-year closing high

European shares rose yesterday led by health care stocks, utilities and merger and acquisition talks but ended below a six-year intra-day high as leading US stock market indexes turned lower.

"It's a small consolidation triggered partly by the Americans," said a trader, referring to the retreat in the European afternoon.

"Some investors are locking in profits," the trader said. The pan-European FTSEurofirst 300 index's close at 1,543.08 points, up 0.31 per cent on the day, was its highest since Jan. 31, 2001, but below a peak of 1,548.90 points set earlier in the session.

The index has risen 4 per cent this year, having advanced more than 16 per cent in 2006. But equity strategist Teun Draaisma at Morgan Stanley said the joyride could not go on forever, adding that markets were already quite expensive.

"I think the day to aggressively position yourself for that kind of scenario was seven or eight months ago, and we've got to think: What's next? And what's next is, I think, there is upward rate pressure.

"We think it's quite a dangerous period in the next six months," Draaisma added.

Stock market performance across Europe varied, with London's FTSE 100 benchmark closing 0.45 per cent higher while Frankfurt's DAX managed a gain of just 0.02 per cent and the French CAC 40 fell 0.08 per cent.

J. Sainsbury Plc rose 1.3 per cent with sources saying private equity firm Cinven has held talks with Texas Pacific Group to contemplate a bid for the British supermarket group.

Cable & Wireless rose 3 per cent with traders citing talk that Deutsche Telekom might be interested in a bid for the British telecoms group. Both companies declined to comment.

M&A speculation also drove utilities, which rose 0.7 per cent on the DJ EuroStoxx sector index, with Iberdrola up 2.8 per cent, Gas Natural up 2.4 per cent and E.ON, which is expected to succeed in its takeover bid for Endesa, up 1.6 per cent.

"Investors are already betting on other energy stocks that could become takeover targets and are taking positions," one trader said.

In health care, Actelion put on 3.5 per cent fuelled by upgrades from Deutsche Bank and Goldman Sachs. Fresenius Medical Care climbed almost 6.5 per cent on hopes that US budget health care reform proposals will boost its sales.

Data showing British retail sales had the strongest January for three years, up 3.1 percent, helped Morrison rise 2.6 percent, Home Retail Group 1.3 per cent and Tesco 1 per cent.

After a largely strong start to the European earnings season, reports from some companies disappointed, with BP falling 1.2 per cent after the company lowered its production growth targets.