Steel stocks pushed ahead strongly on an upsurge in consolidation hopes following the news that three large continental producers had agreed to merge.
Germany's Thyssen Krupp and Anglo-Dutch giant Corus shot ahead after French leader Usinor confirmed that it was to link up with Luxembourg's Arbed and Aceralia of Spain in a deal that would create the biggest steel group in the world.
"It's a combination of takeover fever plus hopes for a reduction in European steel output," said one broker. Initial reaction to the potential €3.4 billion deal was positive with HSBC upgrading Usinor to "add" from "hold".
Thyssen, which has been criticised by a number of brokers, culminating yesterday in a downgrade at Lehman Brothers from "buy" to "market perform", rebounded strongly.
The stock has been a volatile performer during the past 12 months, swinging from a January 2000 peak of €34.50 to a €13.50 low last October. It ended up 3.8 per cent at €20.69. Corus advanced 4 per cent to €1.30.
A story that Kuwait had bought out disgruntled US shareholder Kirk Kerkorian allowed motor giant DaimlerChrysler to overcome uncertainty ahead of the presentation of overhaul plans. The shares have been hesitant since their run-up from the lows of late December. Speculation that Mr Kerkorian had sold his 2.3 per cent to stake to Kuwait, a big shareholder, scotched overhang concerns and sent the shares up 1.6 per cent to €55.59.
BMW gained ground, adding 2.6 per cent at 39.60. Volkswagen, which reports six-month results today, came off 0.4 per cent at €57.19.
Royal Dutch was out of step with an otherwise upbeat oil sector.
The weekend tensions in the Middle East helped lift crude oil prices. Repsol pushed up 2.1 per cent to €19.20 and Total Fina Elf 1 per cent to €159.20.
At Royal Dutch, sentiment was not helped by Credit Suisse First Boston which cut its rating on the stock from "buy" to "hold". The shares fell to €65.50 before closing off 0.1 per cent at €66.37.
Sulzer shot up 6.6 per cent to SFr1,174 as the manufacturing group said it was surprised by a SFr4.4bn takeover approach from the Swiss-based investment group InCentive Capital, its largest shareholder.
InCentive owns directly, or through options, about 15 per cent of Sulzer. The cash and stock offer, which values Sulzer's core industrial business at a premium of more than 40 per cent, is for the remainder of the stock.
The investment group said whether the offer went ahead would depend on it achieving a tax neutral split between Sulzer and Sulzer Medica, in which Sulzer holds 74 per cent. InCentive said it planned to unlock shareholder value by splitting off Sulzer Medica.
A Sulzer spokesman said the board would have to review the offer before making any comment.
In the chemicals sector, BASF jumped 2.2 per cent to €48.01 and Bayer was at €54.13. On Friday, Deutsche Bank added BASF, and cut rival Bayer from its European focus list, saying BASF would benefit from cheaper oil and economic growth.
"We are confident that investors will be buying BASF stock for a cyclical recovery through the next three to six months," Deutsche said.
Danish pharmaceuticals group Novo Nordisk and industrial enzymes group Novozymes climbed as investors positioned themselves ahead of this week's results. Nordisk put on 0.3 per cent to DKr1,650, off a high of DKr1,700, and Novozymes was 3.6 per cent higher at DKr173.
