European stocks bounce to 6-1/2-year closing high

European shares ended session at their highest close in six-and-a-half years, boosted by miners and oil producers, as sentiment rebounded after a China-induced dip.

Among major movers, German utility E.ON jumped following its $9.4 billion share buyback plan, while France's Vallourec surged on speculation that Russia's Gazprom could launch a takeover bid.

"Fundamentals of European companies are still very, very good, together with high confidence and reasonably low inflation, we don't see any massive risks to turn things around," said Mark Tuinman, vice president of Citigroup Smith Barney's wealth advisory unit.

"The cheap valuations of those mega-caps now needs to be unlocked. That's what we are looking for and should support these kinds of markets."

The FTSEurofirst 300 index of top European shares closed up 0.8 per cent, at 1,611.5 points, its highest finish since December 2000. Global markets took a dip on Wednesday, triggered by concerns over China tripling a share trading tax.

Around Europe, Britain's FTSE 100 rose 0.3 per cent, while Germany's DAX gained 1.5 per cent and France's CAC 40 rose one per cent.

Miners helped boost the market, supported by buoyant metal prices, with Xstrata gaining 4.4 per cent while Anglo American rose 4.3 per cent and BHP Billiton added 1.7 per cent.

Oil producers added to the positive tone, with Royal Dutch Shell up 1.3 per cent and Total up 0.9 per cent.

E.ON, the world's top utility and Germany's largest publicly traded firm, rallied four per cent after the company said it plans to spend €7 billion on buying back shares.

"There is a huge amount of buybacks that are adding to the rather high dividend yields," said HVB/UniCredit strategist Gerhard Schwarz in Munich.

"Cash distributions by companies are still very positive, and the buybacks constitute a very strong underpinning for the market."

The news also sparked a rally in the utilities sector, with Germany's RWE adding three per cent.

Dutch chip equipment maker ASML rose five per cent after the company said it would return about €900 million to shareholders in combination with a reverse stock split.

Merger speculation boosted shares in Vallourec by six per cent after the Daily Mail newspaper reported that Gazprom could launch a bid for the French steel tube maker.

Also on the upside, Unibail rose 5.9 per cent on news that the stock will be included in France's blue-chip CAC 40 Index. Its takeover target Rodamco added 5.8 per cent.

On the downside, Kingfisher dropped 1.8 per cent on concerns about its outlook after the home improvement chain said British demand could be dented by interest rate hikes.