German bank is star market performer

Germany's fourth largest bank, Commerzbank, was a star performer as market rumours resurfaced that it could be a takeover target.

The speculation was spurred by a German business newsletter story saying that rival Dresdner had sought to buy a 17 per cent stake in Commerzbank last year, before the bid was blocked by Commerzbank's controlling shareholder, Allianz.

Commerzbank shot up 3.6 per cent to 32.05, while Dresdner picked up 1.4 per cent to €46.90 and Deutsche Bank slipped 0.8 per cent to €90.85.

The insurance sector figures high in the list of losers in the FTSE300 Eurotop indices as investors continued to make for the exits of the defensive areas of the market.

In France, Axa lost 4.1 per cent to €147 after Morgan Stanley Dean Witter began coverage with a neutral rating and Italy's Ras lost 6.4 per cent to €14.97 after JP Morgan downgraded the stock.

Munich Re fell 5.2 per cent to €357, Aegon lost 1.9 per cent to €40.75 and Allianz was 3.1 per cent lower at €376.

Battered telecoms stocks continued to make modest gains.

The big European incumbents were all higher. Deutsche Telekom rose 2.4 per cent to €34.82, Telecom Italia 2.6 per cent to €12.21, British Telecom 2.8 per cent to €630.5 and Telefonica 1.6 per cent to €19.15.

Mark Howdle, European equity strategist at Schroder Salomon Smith Barney, said: "The market is casting around for something to move money towards in Q1."

Telecoms have lagged behind other sectors in recent months and fund managers previously underweight may be increasing their holdings. Another reason why telecoms have risen this week is that many are heavily indebted, so the US rate cut improves their repayment positions.