European stocks recorded a succession of four-and-a-half-year highs this week as continued bid and merger activity and broadly positive corporate newsflow supported the market.
The FTSE Eurofirst 300 index closed yesterday at 1,383.19, up 1 per cent over the week.
Alcatel, the French telecommunications equipment maker, hit a two-year peak yesterday after news that merger talks with Lucent Technologies of the US were back on.
Previous negotiations in 2001 broke down amid disagreements over the composition of the new group's board. They said late on Thursday that they were in discussions over a "merger of equals" that would be "priced at market". A deal would create a telecoms group with combined sales of €21 billion.
Alcatel shares rose 1.6 per cent to €13.05 yesterday, for a weekly gain of 8.9 per cent. There was talk that a merger would prompt Alcatel to dispose of its 9.5 per cent stake in Thales, sending shares in the defence group up by 4.5 per cent to €37.65.
German drugs group Schering recorded a weekly gain of 4.6 per cent to €86.30 after Bayer made an €86 per share offer for the company, trumping an earlier €77 a share bid by Merck. Merck said it would walk away from the battle as a higher price was not justified. WestLB downgraded Bayer from "add" to "hold", saying it regarded Bayer's €700 million synergy targets from the deal as "very ambitious".
It kept its "buy" rating on Merck, suggesting the company could make an extraordinary gain of up to €250 million on the divestment of its holding of about 5 per cent of Schering's shares.
Bayer shares rose 6.8 per cent to €35.42, while Merck added 1.4 per cent to €80.99.
Sanofi-Aventis climbed 5.2 per cent to €77.45 after it settled a patent lawsuit over its Plavix blood-thinning drug.
BMW leapt 8.8 per cent to €46.01 as analysts scrambled to upgrade the stock amid a growing view that the company was poised for a strong year.
Volkswagen rose 6.7 per cent to €62.13 and Fiat gained 7.6 per cent to €10.01.
Pernod-Ricard rose 4.2 per cent to €158.50 after the drinks group's first-half results beat expectations and it said it was optimistic about its full-year earnings.
Swatch Group, the Swiss watchmaker, fell 2 per cent to SFr223.10 over the week after its full-year earnings fell short of expectations. But Merrill Lynch reiterated its "buy" rating on the stock and raised its earnings per share estimates for 2006 and 2007 by 2 per cent.
