Bank shares had a hyperactive session following the news that Societe Generale (SocGen) and Paribas, two French financial heavyweights, planned to forge themselves into the world's fourth-largest bank.
German, Spanish, Italian and Dutch banks all moved higher as a heightened round of consolidation talk among brokers and investors gripped the sector.
In Paris, the trading pattern was more mixed. Paribas, for example, ended €8.15 or 9.7 per cent higher at €92.15 after hitting a session peak of €97. SocGen, which is taking over Paribas via a share deal, ended off €5 at €153. BNP also lost ground, easing €1.95 at €78.
In Frankfurt, Deutsche Bank shot up €1.49 before settling 85 cents higher at €50.55. Dresdner added 70 cents at €36.20 and Commerzbank 50 cents at €26.80. Dutch leader ABN Amro rose 45 cents to €17.55.
Frankfurt improved 59.31 to 5,239.60 on the Xetra DAX index after touching a session best of 5,292.74.
Insurance shares were strong in the wake of the latest deal in the European sector. Munich Re added €9 at €228 and Allianz €8.46 at €333.46. BMW stood out in a generally dull motor sector, gaining €5.60 at €628.60.
Amsterdam gained 7.92 to 540.01 on the AEX index, helped by strong gains for ING and a bounce for KLM ahead of today's third-quarter results.
The airline rose 85 cents to €24.30 while ING led a broad rally for financials. It gained €2.80 or 5.5 per cent to €54.10 while Aegon put on €1.90 at €98.60.
Milan rose 287 to 23,998 on the Mibtel index although volumes were low. Banks held centre stage but there was interest in other sectors. ENI put on €22.1 cents to €5.44, supported by slightly firmer crude oil prices.
Fiat had a volatile day as consolidation elsewhere in the European motor industry continued to raise expectations that the Italian group would announce a major alliance. The shares finished 7.9 cents higher at €2.88 in spite of Friday's warning of lower profits for 1998.
Paris rose to a six-month high as the CAC-40 gained 52.12 to 4,303.92, mainly lifted by financial stocks.
Axa-UAP ended €1.20 lower at €126.60 after it said Guardian Royal Exchange had accepted its €3.6 billion cash and share offer. Some analysts said this might be a deal too far for the acquisitive insurer after a string of M&A announcements last year.
Accor rose €10 or 5.6 per cent to €190 after release of hotel occupancy figures for 1998, up to 68.4 per cent from 65.9 per cent a year ago.
