Telecommunications stocks provided some of the best action on a day when holiday shutdowns in London and New York and a fresh outbreak of euro nerves made for quiet trading.
Weekend press reports created a buzz of excitement at Sonera and KPN with the former said to be in merger talks with Sweden's Telia and KPN gaining from speculation that it was about to dispose of its German mobile arm E-Plus.
Sonera, Finland's top operator, surged 8.2 cent to #11.68 on press reports linking the group with Telia. Sonera boss Tapio Hintikka denied a deal was under discussion but confirmed the companies had met. Telia lost 3.3 per cent at SKr59.
Dutch operator KPN, weighed down by heavy borrowing, pushed up to #12.94 on a story that mobile operator Orange, part of France Telecom, was set to bid for KPN's German mobile operations.
Orange denied any interest in E-Plus but KPN finished the session in upbeat mood, closing 1.2 per cent better at #12.80 as sector analysts set a potential #9.2 billion price tag on E-Plus, jointly by KPN and BellSouth of the US.
Italian utility and chemicals group Montedison advanced as Deutsche Bank added its weight to the potential battle lines being built up around the group.
The top German bank declared a stake of 3.1 per cent in Montedison.
Deutsche Bank was said to be siding with Electricite de France in the French group's attempt to wrest control of Edison from Montedison. EdF, which is keen to break into the Italian electricity generation market, recently acquired 20 per cent of Montedison.
EdF has made it plain that it does not plan an outright bid for Montedison but will use its votes to assert some element of industrial control. Montedison shares, which hit a peak of #3.56 earlier this month, rose 2.4 per cent to #2.93.
Dutch food group Numico had a good day, still benefiting from Friday's news that chief executive Hans van der Wielen had named three leading pharmaceutical companies as possible bidders.
Shares in Numico, which had previously opened the door to a bid overture, picked up 4.6 per cent at #48.60.
Numico said Switzerland's Novartis, along with American Home Products and Bristol-Myers Squibb were all possible partners.
Expectations of a further rotation out of defensives prompted ABN Amro to reduce its rating on the European food sector.
"The rapid fall in interest rates has pushed investors towards recovery sectors and away from defensives . . .and this rotation is likely to gather pace as we move through the second half of 2001," the bank said.
It added that the forthcoming flotation of Kraft in the US might put pressure on the shares of European rivals Unilever and Nestle in the short term as investors switched funds.
Unilever, which has about 32 per cent of its shares owned by US investors, was more vulnerable than Nestle, with about 13-15 per cent of its shares in US hands.
Unilever edged 0.2 per cent up to #63.60 while Nestle eased 0.1 per cent to SFr3,692.
European biotechnology companies had a traditionally volatile day.
MWG Biotech soared 13.7 per cent to #5.40 after the German group maintained its 2001 profits forecasts as it reported a smaller first-quarter operating loss and record first-quarter sales.
In the opposite direction, Morphosys sank 10.6 per cent to #76.91 on lower than expected first-quarter sales.
In the high-technology sector, CPU Softwarehouse jumped 15.2 per cent to #1.89 after a major order helped the German software group to halve its first-quarter pre-tax loss.
Among financials, Bankgesellschaft Berlin BEBG.F dropped to a seven-year low after a report that it would lose up to #2 billion for 2000. The shares lost 4.6 per cent to #8.68.
