Another round of merger speculation drove the Italian banking sector higher. The country's largest bank, IntesaBci, put on 6 per cent to €2.65 after its chief executive said he expected a fresh wave of consolidation in the sector in the medium term, although IntesaBci had no takeover plans at present.

Its internet-focused rival, Bipop-Carire, soared 12.1 per cent to €2.05 amid speculation about a change of control at the troubled bank.

Rumours have suggested that Banca di Roma might be interested in the group. Roma rose 1.7 per cent to €2.63 .

Regional bank Banca Popolare di Verona was even stronger, rising 12.5 per cent to €9.43. Last week, Verona agreed a merger with another regional co-operative, Banca Popolare di Novara, to create Italy's sixth-largest banking group. Novara jumped 8.8 per cent to €5.95.

German financial services holding group AMB Generali dipped 2 per cent to €112.64 as it reported nine-month results and said full-year results would be in line with those for 2000.

Utilities, left behind in the sector re-ratings of the past two months, came in for bearish comment from Merrill Lynch, which downgraded a range of stocks on the basis that sector risk has increased. Held back by the steep rebound for technology sectors, utilities have lagged the market by about 12 per cent since September, according to Merrill. The broker says the risk is that "investors' preference for growth in the market as a whole could mean that utility shares are dumped as a source of cash".

Sector leaders slipped on a day of broad market uptrend.

Eon shed 0.9 per cent at €58.18 and Suez 0.8 per cent at €33.40. RWE was little changed at €42.75.

Oil stocks stayed firm for the second successive session, brushing aside further weakness for crude prices as investors concentrated on hopes for a further round of consolidation in the sector.