BNP's shock take-over bid for merging banks Paribas and Societe Generale dominated trading. The hostile offer, the first in France for a decade, sent speculation rippling across Europe.
Analysts said the bid, which would create the largest European bank by asset value, could unleash a wave of foreign counter-bids. The transaction could also boost domestic consolidation.
Shares in the three banks were suspended for the day but insurance company Axa, a supporter of the take-over with stakes in all three, added €5.70 to €121.50. CCF, still considered a bid target, came within 5 cents of its all-time peak before settling €4.15 higher at €87.55.
In Madrid, Argentaria, up 52 cents at €21.17, and BBV, up 27 cents at €13.33, were the biggest gainers while Sweden's SEB gained SKr4 to SKr103 (€11.57)
In Germany, Dresdner Bank, which has links with BNP, added €1.72, or 6 per cent, to €33.10. Deutsche Bank, invariably seen as a potential suitor in any banking reshuffle, added 98 cents at €47.52. Dutch leader ABN Amro barely blinked, hardening 10 cents at €17.60.
Italy's fast-consolidating banking sector came under renewed scrutiny. BCI rose 8.6 per cent to €6.93 and Banca di Roma 2.3 per cent to €1.36. Unicredito gained 6.1 per cent to €5.21 as investors judged it a likely merger partner for BCI if the talks with Banca di Roma failed.
Excluding banks, Paris laboured through an uncertain day, with the CAC-40 ending up 2.51 at 4,162.31 after turning negative at mid-session.
Frankfurt retreated for the third day, with the sellers targeting cyclicals. The Xetra Dax index finished 60.42 lower at 4,730.05. Thyssen, hit by worries about potential strikes, shed €5.30 at €158.70. Degussa Huels lost €1.40 at €31.80 and software leader SAP crashed €20.10 to €286.
DaimlerChrysler came off €2.50 at €80 after it announced the breakdown of talks aimed at links with Nissan of Japan.
Amsterdam ended 1.61 lower at 520.66 on the AEX index after a session of mixed trading in below-average volumes. Telecoms leader KPN added 65 cents at €41.80 ahead of next week's results statement.
Milan saw renewed activity in the telecoms sector which, along with banks, drove the Mibtel index up 336 to 24,980.
Helsinki ended a roller-coaster session 0.3 per cent higher, with the Hex index adding 16.30 to 6,395.20 after hitting a all-time high at 6,462.30.
Nokia, the market driver for most of the session, closed €3.10 higher at €138.50 but fell from a previous high after an unsteady Wall Street took the shine from its early rise. Raisio fell sharply on news that Unilever had filed a complaint for patent infringement. The share later recovered ground, ending 2 cents lower at €5.81. The two companies are racing to launch competing cholesterol-cutting margarines in Europe.
