EUROPE: TheFrench government's surprise auction of a stake in Crédit Lyonnais set the country's banking stocks into motion. The biggest beneficiary was Lyonnais itself, which soared more than 20 per cent to €46.92 following the hefty price that BNP Paribas paid for the 10.9 per cent stake.

Frankfurt DAX: 3,302.61 (-18.27); Paris CAC: 3,295.68 (+10.1)

BNP fell 7.6 per cent to €42.14 as investors worried that the leading French bank was paying too much. Other French banks were higher on hopes that takeover activity would energise the sector. Franco-Belgian bank Dexia gained 3.8 per cent to €12.46,

Sóciété Générale was also up sharply, gaining 4.2 per cent to €57.65. But Crédit Agricole, which for long has been seen as the natural merger partner for Crédit Lyonnais, sank 3.6 per cent to €17.40 as a deal between the two began to look less likely.

Banking stocks across the rest of Europe were more subdued. The best riser was Italy's Banca Nazionale del Lavoro, which jumped 7.4 per cent to €1.15. But the shares have been hard hit lately and traders said they were only benefiting from short covering. German banks Commerzbank and Deutsche Bank slipped back.

Among insurers, Italy's Generali was up 2 per cent at €19.59 after Mr Giovanni Perissinotto, joint chief executive, said he was expecting double-digit growth in group premiums for 2003. The sector as a whole was 0.8 per cent ahead.

Media stock Vivendi Universal hit its best price in more than a month as it edged closer to a possible bid for full control of Cegetel, the mobile operator in which it already has a 44 per cent stake.

Yesterday Vivendi Universal rose 4.4 per cent to €14.80 while Vivendi Environnement was down 1.7 per cent to €24.58.

In telecommunications, France Telecom gained 6.2 per cent to €16.35 following last week's breakthrough on MobilCom, its former German partner in which it held a 28.5 per cent stake.