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European equities close up on merger speculation

"Corporate earnings are better and compared to Wall Street Europe looks relatively inexpensive."

Mike Lenhoff, chief strategist at Brewin Dolphin Securities

Merger speculation in the drug and banking sectors and a weaker euro which boosted exporters inspired European equities to close at fresh 16-month highs on Friday, while earnings optimism reinforced technology stocks.

But staffing agency Adecco tumbled 11.5 percent after its finance chief quit as the company revealed widespread accounting flaws in its North American business and refused to detail the scale of the damage.

Italian Internet service provider Tiscali was suspended after falling more than 10 percent in the afternoon amid trader talk of balance sheet concerns. Tiscali denied any problems with certification of its 2003 accounts.

The FTSE Eurotop 300 index of pan-European blue chips ended 1.02 percent higher at 990.33 points, the highest close since August 2002 and up more than two percent this year.

"Corporate earnings are better and compared to Wall Street Europe looks relatively inexpensive," said Mike Lenhoff, chief strategist at Brewin Dolphin Securities.

"The dollar rebound relieves some of the pressure on European exporters ... But currency markets won't stop the global economic expansion and demand is getting stronger," he said.

The euro's near 4 percent drop from lifetime highs of just below US$1.29 seen on Monday created demand for dollar-earning exporters like auto makers because a weaker euro lowers the cost of their cars in the US.

The DJ European autos index Autos, up 2.8 percent was the best-performing sector with Germany's DaimlerChrysler up 5 percent, while Volkswagen rose 2.5 percent.

Amid good volumes the number of gainers to losers in the FTSE Eurotop was around three to one.

The narrower DJ Euro Stoxx 50 index picked up 0.89 percent to 2,865.97 points.

Autos and talk of a merger between Germany's Commerzbank and HVB Group, later dismissed by the banks, helped the Frankfurt DAX up 1 percent to 4,111.64 points.

Commerzbank was up a touch, but HVB jumped 4.2 percent.

London's benchmark FTSE rose 0.71 percent to 4,487.9 points and the Swiss SMI was up 1.13 percent at 5,694.5.

Paris's CAC climbed 1.24 percent to 3,671.80 amid speculation of a merger between the France's first and second largest drug makers Aventis and Sanofi-Synthelabo, which denied negotiations.

Aventis was up 1.6 percent and Sanofi gained 3.6 percent.

Cosmetics giant L'Oreal, with a large exposure to the US and which jointly owns 44 percent of Sanofi with oil major Total, was a major blue-chip winner with gains of 3.2 percent.

Shares in German drugmakers Altana rose 2.9 percent and Schering jumped 4.8 percent as talk of French merger activity within the industry sparked takeover speculation in Germany.

Elsewhere sales and profits from US telecoms networking group Juniper topped estimates and were among those that sent Alcatel up 4.1 percent.
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