Stock markets powered forward with Wall Street, reflecting a growing belief that US interest rates would rise by only 25 basis points.
The Eurobloc 100 index of leading shares in the euro zone rose 10.73 or 1 per cent to 1,084.05. The pan-European Eurotop 100 index fared even better, gaining 48.78 or 1.6 per cent to 3,010.74. The more broadly-based Eurotop 300 index climbed 19.83 or 1.5 per cent to 1,310.45. Frankfurt continued to improve, boosted by takeover talk and the strong start on Wall Street. The Xetra Dax index closed up 47.84 at 5,301.98 for a two-day advance of 115 points.
Deutsche Bank and Dresdner shot ahead after the pair announced talks aimed at merging their retail operations in a bid to wrest back market share from Landesbanks which dominate high-street banking in Germany.
So far, there is no suggestion the deal will lead to an outright merger, but the move is being widely interpreted by the stock market as a prelude to deeper banking consolidation within Germany. Deutsche ended #3.34 or 5.3 per cent better at #66.99 - its high for the session - and Dresdner #1.80 or 4.2 per cent at #44.89. Retailer Metro rose #1.59 to #54.34 ahead of today's interim results statement while Deutsche Telekom, which puts out six-month figures tomorrow, shed 40 cents at #38.15. Viag, up 17 per cent last week on persistent rumours of an impending link with rival diversified utility Veba, ran into profit-taking, slipping #6.50 to #536. Veba lost 52 cents at #61.99.
Paris edged forward as banks continued to dominate trade. The CAC40 index ended 15.35 or 0.3 per cent higher at 4,487.35.
Among banks, Credit Commercial de France continued to climb on speculation that it might soon become a takeover target for either Swiss Life, ING or KBC Bancassurance, which all own large stakes. CCF rose #1.80 or 1.6 per cent to #115.50, making a gain of 6 per cent in the last four sessions and 46 per cent since the start of the year.
The three big banks involved in a protracted takeover battle also attracted investor interest. Banque Nationale de Paris, which has won control of Paribas but not Societe Generale, ended 75 cents or 1 per cent down at #74.10 after the banking regulator said it would decide on the outcome of the dispute by the end of the week. Paribas fell #1.50 or 1.4 per cent to #105.10 while SocGen rose #2.30 or 1.3 per cent to #185.30.
Sanofi-Synthelabo, the drugs group, continued to benefit from the news last week of its inclusion in the Euro Stoxx 50 index of leading shares. The group was the top gainer in the CAC, climbing 1.55 or 3.8 per cent to 41.90 to make a two-session advance of 7 per cent.
