It was the top performing sector with a gain of 1.8 per cent as European markets moved ahead in subdued trading.

The FTSE Eurobloc 100 index was up 0.4 per cent at 1,071.48. The FTSE Eurotop 100 index added 0.2 per cent at 2,954.89, and the broader FTSE Eurotop 300 put on 0.2 per cent at 1,291.33.

Frankfurt ended the day within a whisker of its trading range for the session, with the Xetra Dax index up 37.67 at 5,257.10.

Top utilities Viag and Veba were among the day's best performing blue chips in Europe, surging more than 3 per cent apiece as merger rumours flew round the market at the opening bell. Both companies were called for talks with the industry regulator, but the main spur to the speculation looked to be a German media report that the two were planning a link.

Veba ended 1.75 higher at €59.40 and Viag rose €16.90 at €485 after hitting a session peak of €492.

MAN remained in demand, rising 4.5 per cent or €1.45 to €33.89 as takeover speculation refocused on the truckmaker amid talk that Volvo, the Swedish motor giant, was set to forge links with MAN.

Engineering conglomerate Linde fell on news of a SKr31 billion cash takeover bid for AGA, the Swedish gases group. The stock came off €3.85 or 5.9 per cent at €61.55.

Dresdner Bank ended 60 cents better at €41.30 after half-year earnings comfortably met brokers' expectations. HypoVereinsbank, with which Dresdner's name has increasingly been linked, added 70 cents at €55.80.

Merrill Lynch initiated coverage of software leader SAP with a "buy" recommendation which helped lift the shares €6.00 at €367. Hair care group Wella dipped three cents to €30.50 ahead of tomorrow's results statement.

Paris edged forward on a day dominated by the three big banks involved in a complex takeover dispute. The CAC-40 index ended 24.47 or 0.6 per cent higher at 4,458.75.

Banque Nationale de Paris ended €1.95 or 2.6 per cent lower at €73.45 after it emerged that only one of its two hostile takeover approaches had been successful.

The bank, which had bid for both Paribas and Societe Generale in an attempt to prevent them merging, has won majority control of the former but not the latter.

Paribas dropped €4.10 or 3.9 per cent to €101.90 on the news, while SocGen weakened €2 or 1.1 per cent to €187.