German pharmaceuticals group Schering shot higher as media reports raised speculation that Switzerland's Roche might be about to launch a bid.

Both companies declined to comment. Schering closed 6.4 per cent higher at €56.95 while Roche certificates slipped 0.9 per cent to SFr15,545.

Novartis was 1.8 per cent higher at SFr2,682 and Aventis put on 2.6 per cent at €80.05.

Telecoms and telecom equipment makers took comfort from the absence of any great shock in Motorola's sales estimates for 2001. The figures suggest last year's growth of about 45 per cent will slip to about 25-30 per cent this year.

Nokia, which had lost 10 per cent in the previous two sessions, bounced back 6.4 per cent at €43. Ericsson added 7 per cent at SKr105.50.

Software shares were strong. SAP continued its recovery, gaining 8.3 per cent to €178 as Goldman Sachs named it as one of a handful of TMT stocks it expected to perform well.

UBS Warburg repeated its overweight recommendation for European software stocks, highlighting SAP, Autonomy, Software AG, and Unit 4.

But the Belgian company Real Software fell to a record low after a report that its chief executive was under pressure to resign. The shares closed down 28 per cent at €4.50.

Europe's data communications companies staged a rebound, following big share price falls late last year.

Leading the trend was the Dutch cable company UPC, up 21 per cent to €14.80, while mid cap network company Versatel rose 11.8 to €13.75 and KPNQwest gained 12.5 per cent at €27.

Media and internet stocks were hit by the earnings warning from Yahoo!, which partly blamed the slowdown in advertising.

The French defence electronics company Thales, the former Thomson CSF, fell 3.7 per cent to €45.75.

Among financials, AMB tumbled 5 per cent to €96.

Deutsche Bank put on 4.5 per cent to €95.10.