European stocks end higher as M&A activity swirls

European stocks ended yesterday a touch higher, boosted by mergers and acquisitions, while investors looked to Wall Street for direction after data calmed US interest rate concerns.

Among major gainers, Gas Natural rallied after France's Suez said it planned to increase its stake in its Spanish rival, while takeover developments boosted both Reuters and Hanson.

"On a fundamental basis, the market is quite healthy, we don't see any bubbles right now. We have extremely high liquidity and M&A activity which is pushing markets further," said Philipp Musil, fund manager at Constantia Privatbank.

"We haven't seen such strong markets for a long time, so I think we'll have to take a breath before we see further upside."

The FTSEurofirst 300 index of top European shares closed up 0.3 per cent at 1,584.0 points, after dipping to 1,571.7 points earlier in the session.

Around Europe, Britain's FTSE 100 gained 0.2 per cent, while Germany's DAX added 0.6 per cent and France's CAC 40 rose 0.4 per cent.

Gains on Wall Street helped keep European markets in positive territory, with the Dow Jones industrial average up 0.9 per cent at 13,465.4 points as consumer price data pointed to stabilising inflation.

In Europe, data showed the euro zone's economy grew more than expected in the first quarter, thanks mainly to Germany.

Automakers provided a boost, with DaimlerChrysler, which unveiled a sale of troubled US unit Chrysler on Monday, up three per cent after its 73 per cent quarterly profit rise beat market expectations. Elsewhere in the sector, Renault added 3.7 per cent and BMW gained 1.5 per cent.

Banking stocks also proved buoyant, with Capitalia rallying more than five per cent before closing flat amid further signs it was on track to be picked off by UniCredit.

Bucking the sector trend, Deutsche Postbank fell 2.1 per cent after its owner indicated it wanted to keep control. Merger activity continued to swirl, with Gas Natural jumping 6.4 per cent after France's Suez said it planned to increase its stake in its Spanish rival.

Construction stocks gained, with British builder Hanson up 4.7 per cent after HeidelbergCement agreed to buy it for £8 billion. Shares in the German company fell 0.8 per cent.

Elsewhere, Reuters rose 3.4 per cent after Canadian publisher Thomson Corp agreed to acquire it for about $17.2 billion, creating the world's biggest financial news and data group.

"(M&A) is everywhere and always there. You're still in this environment where the cost of debt and the cost of equity are being arbitraged in favour of equities," said Bernard McAllinden, an investment strategist at NCB Stockbrokers.

Mergers and acquisitions have helped fuel a rise of around six per cent in the FTSEurofirst 300 index this year after a 16 per cent gain in 2006.

On the downside, Thales fell 2.8 per cent as analysts proved uninspired by its quarterly results, while Rio Tinto dropped 1.3 per cent after bid speculation waned.