European shares rebounded from three-month lows yesterday as solid earnings from heavyweights Shell and BASF and a sharp drop in oil prices eased worries about global economic fundamentals.

Hopes of a bid battle lifted shares in UK drinks firm Allied Domecq by three per cent after a group led by Constellation Brands said it might contest an agreed £7.4 billion takeover bid led by France's Pernod Ricard.

Pernod, which said it remained confident in its offer, saw it shares fall 1.9 per cent.

On one of the year's busiest earnings reporting days, the FTSEurofirst of pan-European blue chips was 0.3 per cent higher at 1,063.1 points by 0720 GMT, while the narrower DJ Euro Stoxx 50 also added 0.3 per cent to 2,950.9 points.

Ahead of results at 1100 GMT, GlaxoSmithKline was another bright spot, up 2.3 per cent after the group resolved a drug-withdrawal problem in Puerto Rico, opening the way to two withdrawn drugs to return on the US market by mid-year.

Vivendi Universal gained 2.3 per cent after the media firm raised its guidance after posting forecast-beating sales, while ABB also pleased investors with a strong rise in first-quarter profits and an unchanged annual guidance.

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