European shares closed higher yesterday, with British confectionery group Cadbury soaring 38 per cent following a £10.2 billion (€11.5 billion) bid approach from US company Kraft Foods.
The pan-European FTSEurofirst 300 index of top shares rose 1.4 per cent to 975.90 points, just 0.3 per cent away from an 11-month closing high.
The European benchmark index has risen more than 51 per cent since it hit a lifetime low of March 9 as investor confidence about prospects of economic recovery have grown.
Across Europe, the FTSE 100 index rose 1.7 per cent to its highest close in more than 11 months. Germany's DAX and France's CAC 40 both rose 1.5 per cent.
All major sectors rose yesterday, with food companies among the most notable gainers.
Britain's Cadbury soared 37.9 per cent after turning down the cash-and-shares offer from North America's biggest food group, which it tipped to come back with a higher bid.
"Positive sentiment from Friday's close on Wall Street and bid speculation on Cadbury are igniting things a little bit," said Philippe Gijsels, senior equity strategist at Fortis Banks. Other analysts said the market lacked direction with Wall Street closed for the Labor Day holiday.
Volumes were 70.6 per cent of the 90-day average.
"Everybody is cautious, and positioned for a downturn, but you need a trigger. The trend for the moment is sideways," said Giuseppe-Guido Amato, strategist at Lang & Schwarz. "Last week, we had good indicators, but the market couldn't go up."
The food sector received another boost from an upbeat trading statement at Associated British Foods, up 4.1 per cent. The company was able to point to strong trading at its sugar business, as well as its Primark discount clothing chain.
Whitbread, Britain's biggest hotel operator, surged 18 per cent after it said full-year profit would beat analysts' expectations, even as it reported a decline in sales.
The rise took Whitbread's market capitalisation to more than £2.1 billion and this may be enough to see it re-enter the FTSE 100, which is going through its quarterly reshuffle, based on values at the close today.
The heavyweight financial sector also boosted the index.
Swiss Re rose 3.4 per cent after saying reinsurance prices were rising overall and it was well positioned for the January 2010 renewals season, with a considerably strengthened capital base.
Other insurers to rise included Aegon, Aviva, AXA, and Legal & General, up between 2.3 and 3.5 per cent.
Banks to gain included Barclays, Credit Suisse, HSBC and UniCredit, up between one and 2.4 per cent.
Spain's Telefonica rose 2.1 per cent after the telecoms company said on Sunday it had reached a deal with China Unicom whereby each would buy $1 billion worth of the other's shares as part of a strategic alliance. The market got support after Group of 20 finance ministers and central bankers said they would not remove economic stimulus until the global recovery was well established.
Standard Life Investments advised investors to "stay heavy" in the UK as the market was supported by favourable valuations, but said "stay light" in Europe ex-UK as "the region remains vulnerable to a continued slowdown in world trade growth and weaker earnings valuations".