LONDON: European shares advanced to a 2005 high Thursday after the first interest-rate hike on the Continent in five years, as markets interpreted comments from European Central Bank Jean-Claude Trichet to mean that there would only be a limited number of subsequent rate hikes and as energy sector and M&A moves offered support.
The German DAX 30 index added 1.4 percent at 5,266, France's CAC 40 added 1.5 percent at 4,636 and the U.K.'s FTSE 100 gained 1.2 percent at 5,486.
The pan-European Dow Jones Stoxx 600 added 1.6 percent at 304.31, its best close of the year.
European stocks were also helped by a higher open to U.S. stock markets, which were boosted by inflation-friendly data.
Oil majors such as BP and Total led the oil and gas sector higher after Wednesday's U.S. government and industry reports showed a bigger-than-expected drawdown in crude supplies.
The euro was just under US$1.17 after the ECB rate decision, the first increase in five years that was widely anticipated by the markets.
ECB President Jean-Claude Trichet said that the bank wasn't necessarily about to embark on a series of rate hikes.
In merger news, Old Mutual rose 1.2 percent after amending the terms of its offer for Skandia Insurance to make a takeover more likely.
The South African insurer said that its offer, valued at more than US$6.02 billion (euro4.82 billion), now requires more than 50 percent of Skandia holders to approve the deal from a previous threshold of 90 percent. Skandia added 2.3 percent.
Online bank Egg surged almost 14 percent in London after parent company Prudential said it will buy out the shares it doesn't hold in the online banking company.
Prudential slipped 0.5 percent.
Swiss biotech Berna soared 13 percent after Netherlands-based Crucell offered 491 million Swiss francs (US$450 million; euro317 million) for the company.
Crucell fell 4.3 percent in Amsterdam.
And British pub company Punch Taverns climbed 3.7 percent after it agreed to buy privately owned Spirit Group for 2.7 billion pounds (US$4.7 billion; euro3.9 billion), including 1.25 billion pounds (US$2.2 billion; euro1.8 billion) of debt.
Nokia, the world's largest mobile phone manufacturer, closed higher in Helsinki.
It said it was reducing its operating margin target for its networks division, but leaving other goals in place.
Nokia added that the mobile device industry should see growth of at least 10 percent in 2006.
The three largest French cell phone companies all gained after competition authorities fined the companies amounts an analyst described as "insignificant'' for collusion.
Orange, the mobile phone unit of France Telecom, and the country's largest mobile phone operator, was fined euro256 million (US$301 million), Vivendi Universal's SFR was fined euro220 million (US$259 million) and Bouygues' Bouygues Telecom was fined euro58 million (US$68 million).
But the news boosted the operators, as the fine wasn't as steep as some had feared. France Telecom gained 1.6 percent, Vivendi increased 2.7 percent, Bouygues gained 0.9 percent and Vodafone Group, a minority owner of SFR, rose 0.8 percent.
German steelmaker ThyssenKrupp ended slightly higher after it said that net profit rose 13 percent this year on worldwide demand for its steel and automotive parts, but warned that high energy prices would likely hamper its 2006 results.
ThyssenKrupp's Anglo-Dutch peer Corus Group surged 6.3 percent after Morgan Stanley upgraded the company to equal-weight from underweight. - AP