European shares close higher

European shares ended higher yesterday as buoyant retail stocks, acquisition talk and a fall in oil prices after Iran said it would release captured British navy personnel offset the impact of weak US services data.

The FTSEurofirst 300 index of top European shares ended 0.15 per cent higher at 1,538.84 points, its third successive higher close, with Germany's DAX rising 0.4 per cent and France's CAC 40 rising nearly 0.5 per cent.

Britain's FTSE 100 was little changed ahead of a key interest rate decision today.

European markets are staging a recovery after a sharp slide in late February and early March prompted by worries over US growth and an unwinding in investments made using borrowed low-yielding yen as risk aversion rose.

The FTSEurofirst benchmark has gained over 3.7 per cent so far this year.

"The equity risk premium on European stocks is still attractive," said Etienne de Calatay, strategist at Bank Degroof in Brussels.

"It's appropriate to buy stocks today, maybe to a lesser extent than three to six months ago, but if someone landed from the moon or Mars now, we would still advise being overweight on equities, with a strong preference for Europe."

French retailer Carrefour gained 3.4 per cent on talk that Colony Capital founder Thomas Barrack wanted the company to raise up to €30 billion from property sales.

Colony Capital and Groupe Arnault announced last month they had taken a stake of 9.8 per cent in Carrefour.

Shares in Britain's Home Retail went up 2.5 per cent on a brokerage upgrade.

The DJ Stoxx European retail index was the top gainer among sectors in Europe, tacking on 1.1 per cent.

Telecom Italia rose one per cent as the Wall Street Journal said on its website that France Telecom and Telefonica were each considering counter offers to a bid from AT&T and Mexico's America Movil.

Telefonica and France Telecom declined to comment on the report.

Continuing the theme of mergers and acquisitions, which contributed to a 16 per cent rise in European stocks last year, persistent bid talk lifted British insurer Prudential 1.7 per cent, with HSBC named as a potential suitor. Both companies declined comment.

But German carmaker DaimlerChrysler fell 1.45 per cent on worries that the company had not given a clear indication of the future of its troubled Chrysler unit at an annual general meeting.

Crude oil fell $1.50 in 30 minutes after Iranian President Mahmoud Ahmadinejad said the country would free 15 Britons captured on March 23, easing supply worries from the world's fourth-largest explorer US crude was down 66 cents, or one per cent on the day, at $64.03 a barrel, providing relief to stock markets worried about mounting energy costs.