LONDON (AP) - European shares locked in solid gains on Tuesday with investors cheered by merger and acquisition activity in the beverage sector, strong results from International Business Machines and a weaker euro.
U.S. stocks helped European markets, opening higher as IBM, Merrill Lynch and Johnson & Johnson headed a slew of stronger-than-expected quarterly earnings reports.
France's CAC 40 index closed up 1.4 percent at 4,424.2, while the U.K.'s FTSE 100 index shed 0.2 percent at 5,201.5 as banks, airlines and drug companies lost ground.
Germany's DAX 30 index ended up 1.1 percent to 4,770.5 after German economic sentiment improved considerably.
Doubts over the strength of second-quarter corporate earnings, raised by banking giant Citigroup on Monday, were dispelled later as computer giant IBM reported a 5.2 percent rise in second-quarter profit.
IBM peers Atos Origin and Cap Gemini both gained about 2 percent in European trading.
European deal-making hopes were sparked by recurring talk that Groupe Danone may be bought by PepsiCo. Danone shares closed up 10.2 percent to euro87.60 (US$104.81) in Paris.
Brewer SABMiller jumped 10.6 percent after agreeing to buy Colombian brewer Bavaria from Santo Domino Group.
Dutch brewing company, Heineken, previously seen as a bid rival to SABMiller, finished up 1.6 percent in Amsterdam.
In London, discount clothing retailer Matalan rose 7.3 percent amid reports that it may be in line for a bid. News services linked the company Tuesday with Iceland's Baugur and Wal-Mart Stores Inc.'s Asda unit.
Chipmakers were mixed after British chip designer ARM Holdings detailed results ahead of Intel Corp., which was to report after the New York close on Tuesday.
ARM fell 4.2 percent after the microchip designer lowered its outlook for full-year 2005 dollar-revenue growth to 15 to 20 percent, from at least 20 percent.
Swedish consumer goods maker Electrolux AB shares added 5.1 percent after it reported stronger sales in the second quarter but earnings fell 3.5 percent mainly due to higher costs for raw materials.
German reinsurer Munich Re AG rose 3.6 percent after saying said second-quarter profit will be reduced by euro400 million (US$332 million), due to the reinsurer adding US$1.6 billion (euro1.3 billion) to reserves at its U.S. subsidiary, American Re, from 1997 to mid-2002.
Deutsche Bank shares gained 1.5 percent after Goldman Sachs upgraded the bank to in line from underperform, citing improved fixed-income trading.
The broker told clients market expectations for second-half fixed-income revenue appear low compared with the trading conditions implied by the Goldman Sachs fixed income indicator. - AP