European stocks closed higher yesterday with some bourses touching three- or four-year highs as SAB Miller surged after agreeing to buy South America's No.2 brewer, while Danone shone.
The ZEW indicator of German investor confidence rose to its highest level in 10 months, also supporting shares, which recovered from Monday's slip on earnings worries after Philips disappointed investors.
The pan-European FTSEurofirst 300 index of blue chips unofficially closed 0.35 per cent higher at 1,164.7 points, below a three-year high hit last week but still up nearly 12 per cent so far this year.
Steel makers and banks pushed Spain's Ibex 35 index through the key level of 10,000 for the first time since February 2001, although it later peeled back slightly, and Germany's Dax added more than one per cent to join those hitting three-year peaks.
The Dax was boosted by the July ZEW figure's surge to 37.0, well above a consensus estimate of 22.0, on bullish sentiment about the global economy and a weaker euro, which was helping exporters.
"The July German ZEW numbers seem to be a much better vindication of recovery expectations ahead and is bound to hearten hopes that the German economy has turned the corner," said David Brown, chief European economist at Bear Stearns.
"But we would caution against getting too carried away."
The euro rose briefly above $1.20 on the ZEW numbers but the dollar remained strong on hopes that Federal Reserve Chairman Alan Greenspan would give an upbeat view of the economy before Congress on Wednesday, signalling more US interest rate rises.
Britain's FTSE 100 underperformed continental Europe, dipping six points as some investors took money out of UK blue chips to ready themselves for a reweighting in Royal Dutch/Shell as the shares unify.
But others in the market believed the FTSE had reached its near-term optimum level in comparison to other European bourses.
"We were actually getting pretty near people's year-end targets," said Stuart Fraser of private client stockbroker Brewin Dolphin.
"There aren't many people going above 5,500, so having got to where quite a lot of people thought the market might finish the year at, and having had a good run, maybe the inclination is to take a few profits."
SABMiller broke the mould to rise 10.6 per cent on news that it was buying Colombian brewer Bavaria SA in an agreed $4.8 billion deal, to tap fast-growing beer markets.
Fresh speculation that US soft drink giant PepsiCo was planning a hostile takeover bid pushed Danone shares up 10 per cent. The shares also set a new intra-day high of €90.55. Danone declined to comment on the matter.