European stocks rose yesterday, adding to the previous session's lofty gains as renewed consolidation talk propelled mining stocks higher.
Dutch-Belgian financial services company Fortis rose two per cent on news that Ping An Insurance (Group) Co, China's No. 2 life insurer, bought a 4.2 per cent stake in the firm for $2.7 billion.
But the deal failed to spark a rally among banks, and jittery investors continued to fret about banks' exposure to a credit crunch. Barclays dropped 2.5 per cent, HSBC fell 0.6 per cent, and Natixis shed 3.1 per cent.
The FTSEurofirst 300 index of top European shares closed 0.5 per cent higher at a two-week high of 1,508.22 points. It gained 2.7 per cent on Wednesday as hopes of an US interest rate cut sent banking stocks rallying.
Europe's benchmark index, up 1.7 per cent on the year, is still down 5.5 per cent for November and is on track for its worst monthly fall since January 2003, hit by renewed fears that banks have not yet unveiled the full impact of the credit crisis in their results.
"Fear is the key in all of this. And there is still a lot of deeply embedded anxiety eating away at market confidence right now," Bear Stearns analysts wrote in a note.
"With year-ends approaching and balance sheets and P/L (profit and loss) positions being assiduously defended, investors are unlikely to be rashly over-bold in this situation," they wrote.
The Dow Jones STOXX bank index, which managed to eke out a 0.1 per cent gain on the day, is still about 16 per cent down on the year. Barclays is down 27 per cent, Royal Bank of Scotland 33 per cent and UBS 25 per cent.
Around Europe, Germany's DAX index gained 0.5 per cent, while both France's CAC 40 and the UK FTSE 100 index added 0.7 per cent .
Among the biggest gainers, Anglo American added 6.7 per cent and Rio Tinto rose 4.4 per cent.
Earlier in the session, Indian-focused mining group Vedanta denied market rumours it was the subject of a takeover bid after the speculation pushed its shares higher. It surged 7.8 per cent.
Earlier this month, BHP Billiton, the world's largest mining group, launched a campaign to take over rival Rio Tinto.
Alliance & Leicester jumped eight percent after the mortgage lender provided reassurance it is coping with tough funding markets.