Drugmakers such as Sanofi-Aventis boosted European shares to a stronger close yesterday in choppy trade, while US data eased inflation fears ahead of an expected rise in interest rates.
Europe's third-largest drugmaker Sanofi-Aventis rose 2.4 per cent after it won a patent case in Canada over its top-selling blood thinner Plavix.
Among other gainers, Dutch chip equipment maker ASML rallied 3.6 per cent as Deutsche Bank upgraded its rating to "buy" from "hold", saying the stock's risk-reward ratio had become more compelling.
The FTSEurofirst 300 index finished 0.2 per cent stronger at 1,081.7 points, rallying from the day's low of 1,075.0 points. The index gained after data on US producer prices soothed inflation fears and lifted US markets.
Takeover moves were in focus in Italy, with investors closing ranks to block a takeover of BNL by BBVA after the Spanish bank and Dutch giant ABN Amro said they might bid for Italian banks. Shares in ABN Amro and BBVA ended higher, while BNL eased.
While the US Federal Reserve is expected to raise interest rates by 25 basis points to 2.75 per cent to ward off inflation, strategists said markets were still concerned about quicker and bigger rate rises coming from the central bank.
"People are beginning to factor it in, but I don't think that move is over yet," said Michael O'Sullivan, strategist at State Street Global Markets.
Officials from the Federal Reserve began an interest-rate policy meeting, and an announcement is due at around 1915 GMT.
"Markets have been very sloppy in the last week. I think that will continue until after the Easter break," said O'Sullivan.
"Investors are moving away from things like energy, they are becoming less enthusiastic about financials and buying things like materials and industrials with more strength," he said.
Around Europe, Paris's CAC-40 gained 0.35 per cent, and Frankfurt's DAX closed 0.6 per cent higher. London's FTSE 100 was flat, and Zurich's SMI edged up.
Among losers, mobile phone company O2 Plc fell 4.9 per cent as it painted a gloomier picture for UK growth next year and forecast annual earnings slightly below consensus.
German retailer Metro put on 1.3 per cent after reporting a 10 per cent rise in quarterly operating profit and forecast more growth this year. Dresdner Kleinwort Wasserstein upgraded its rating on the stock to "add" from "hold".