Euro markets rebound

PARIS: European shares rebounded yesterday, as takeover talks lifted selected stocks such as Lloyds and Suez, but sentiment remained fragile on the eve of a eurozone interest rate announcement.

Drugmakers also stood out, with GlaxoSmithKline up 2% after agreeing to develop osteoarthritis drugs.

The FTSEurofirst 300 index of leading European shares added 0.7% to close at 1,289.1 points.

Investors braced for a potential European Central Bank interest rate rise today. This added to worries spurred by hawkish comments made by Federal Reserve officials in recent days.

Around Europe, London??™s FTSE 100 index and Paris??™s CAC 40 both closed 0.6% higher, while Frankfurt??™s DAX rallied 0.8%, and the Swiss Market Index gained 0.7% in Zurich.

Merger and acquisitions gave the market a shot in the arm.

Suez shares rallied 3.3% after Enel chief executive Fulvio Conti indicated that the battle for control of the French utility was not over.

PagesJaunes added 1.1% after France Telecom said it may sell part or all of its 54% holding in the French directories business.

Shares in France Telecom closed 2.3% higher.

Elsewhere, British insurer Resolution agreed to buy the life insurance business of Abbey bank for ??3.6bn ($6.73bn) in a deal that will double its size and propel it into the FTSE 100 blue-chip share index. Resolution shares surged more than 3.1%.

Lloyds TSB rose 2.4% as news the British bank had appointed US investment bank Lehman Brothers as one of its corporate brokers rekindled takeover talk.

Other standout movers included Spanish property company Colonial, up 9%, while drinks firm Diageo gained 2.6%.

The dollar gained some ground against the euro and yen amid increased expectations of a US interest rate hike in June.

The euro fell to $1.2797 in late European trading from 1.2830 late on Tuesday in New York.

The dollar stood at ??113.39 from 113.28 on Tuesday.

Comments from US rate setters Susan Bies and William Poole bolstered a hawkish tone set by Fed Reserve chief Ben Bernanke earlier in the week. ??“ Agencies