European stocks edged higher yesterday as a bid for Britain's Amersham kept the drug sector bubbling, while many euro zone exporters were steady despite a further slide in the dollar.
But bourses remained cautious as a weaker opening loomed on Wall Street where, in the absence of major economic figures, investors waited for earnings from Internet group Yahoo! for a steer.
Dutch Philips Electronics rose on news it was trimming its stake in Taiwan Semiconductor to reduce debt, and bullish comment from Morgan Stanley bank sent newly-floated Hypo Real Estate surging.
French media group Vivendi Universal and America's General Electric signed a final deal to merge their show business assets to create a $43 billion entertainment powerhouse. Vivendi shares gained 2.2 per cent to 16.6 euros.
By 1102 GMT, the FTSE Eurotop 300 index was up 0.6 per cent at 894 points as it struggles to regain September's 8-1/2 month highs in the face of earnings uncertainty, a rising euro and strong crude oil prices.
The DJ Euro Stoxx 50 index gained 0.7 per cent to 2,494 points.
The dollar came within a cent of all-time lows against the euro on growing belief the greenback will have to weaken to narrow the US current account deficit and that the move has official backing.
A rising euro makes exports from the euro zone less competitive in the US market. Exporters such as autos and chemicals tumbled on Tuesday as the dollar's fall gathered pace, but most leading export sectors held their ground yesterday.
A stronger euro will adversely affect euro zone growth, earnings and equity performance, said Abhijit Chakrabortti, a global strategist at JP Morgan investment bank.
"We see about three per cent upside to our year-end fair value targets for global equities for the remainder of the year, with negligible upside for European equities," he said.
Earnings momentum remains marginally negative in Europe as downgrades to 2003 and 2004 consensus expectations continue, Charkrabortti said. JP Morgan has a year end target of 1,070 points for the S&P 500 index, some 30 points above current levels.
Sodexho, the world's second biggest caterer, disappointed investors by setting itself a modest growth target for next year after a string of profit warnings.
The firm is also dogged by worries over a US racial discrimination lawsuit that could end with Sodexho paying up to $1 billion in damages, according to some estimates. Sodexho shares eased 2.2 per cent to €23.2.
The tone was better in the healthcare sector after Amersham said it had received a bid approach, lifting its market value by more than a fifth to $7.7 billion.