ABB bounced back after its dismal performance since the start of last month as vague takeover talk brought out speculative buyers. The share price, hard hit in recent sessions because of the company's links with influential investor Martin Ebner, jumped 9.8 per cent to SFr6.59.

Frankfurt DAX: 3,568.64 (+235.99); Paris CAC: 3,284.79 (+169.41)

However, many analysts were cautious about speculation that General Electric of the US might be a bidder for the Swiss-Swedish engineer. The shares had fallen as much as 13 per cent on Monday on concerns that Mr Ebner's troubled BZ Group, which owns 9.7 per cent of ABB, may be forced to reduce its stake to cut its debts.

Insurer Baloise was another beneficiary of the waning Ebner effect as investors took the view that Monday's 7.7 per cent tumble was overdone. The shares put on 11.7 per cent to SFr84.50.

Swiss Re and Munich Re were among the gainers on the view that the world's two leading reinsurers were better placed than many primary insurers to cope with difficult trading conditions. Swiss Re and its German rival each rose 9.3 per cent to SFr 123.50 and €187.34 respectively.

French insurer AXA staged a strong rally in Paris, rising 11.47 per cent to SFr11.95.

And Dexia,the Belgian-French financial group, gained 7.9 per cent to €12.07 as investors welcomed an upturn in second quarter revenues and better gross operating income than expected in preliminary quarterly results. Swiss Life was 9.9 per cent higher at SFr227.

Philips, the Dutch electronics group and Europe's third-largest chipmaker, outpaced much of the rest of the technology sector as it gained 9.4 per cent to €20.11 after Merrill Lynch upgraded the stock to "strong buy" from "buy". Franco-Italian chipmaker STMicroelectronics rose 7.8 per cent to €19.62, while Siemens gained 6.5 per cent at €44.34. (Financial Times Service)