European shares nudged closer to five-year highs yesterday, buoyed by Spanish utilities and retailers as a flurry of takeover activity centred on the sector, while mining stocks helped provided support.
Swedish fashion giant Hennes & Mauritz gained after reporting healthy earnings, but catering firm Compass and insurer CNP fell after disappointing updates.
"The free cash flow delivered by companies is dramatically high so they can do bids," said Emmanual Soupre, fund manager at Neuflize Gestion in Paris.
"We remain slightly positive, mainly invested in defensive growth stocks and we prefer very liquid shares, mainly large caps."
The pan-European FTSE urofirst 300 index closed up 0.6 per cent at 1,397.1 points.
The index just failed to close a four-and-a-half-month gap during which European shares, bedevilled by inflation and interest rate worries, fell nearly 13 per cent before rebounding.