An unconfirmed report that two of the US's biggest drugs groups could be in merger talks sparked a rally among US and European drug stocks yesterday.

The Wall Street Journal said Warner Lambert and American Home Products were in advanced talks which could lead to an announcement of a $65 billion (€62 billion) deal.

Shares in Warner-Lambert, the ninth-largest US group in terms of global prescription drug sales, traded up $6.56 1/4 while American Home Products, the US number five, was up $3.62 1/2 at $54.