European shares rose on the first trading session of the year on Monday, extending last year's strong run, with banks, oil producers and drugmakers leading the gainers.
By 0836 GMT, the FTSEurofirst 300 index of leading European shares was up 0.8 percent at 1,054.18 points, after surging 26 percent in 2009 — its best yearly gains in a decade after a dismal 2008, when it slipped 45 percent.
Novartis ticked up 0.1 percent after the drugmaker said it plans to get full control of eye care group Alcon for a total of $39.3 billion, to diversify away from prescription drugs, after agreeing to acquire a majority stake from Nestle.
Other drugmakers were also firmer. GlaxoSmithKline, AstraZeneca, Roche and Sanofi-Aventis were up 0.2-0.9 percent.
The news also raised speculation that Nestle, which gained 0.7 percent, might enter the fray for Britain's Cadbury and bid against Kraft Foods. Cadbury put on 0.3 percent.
The Sunday Times said Kraft Foods was preparing to sweeten its hostile $15.9 billion takeover bid for the UK confectionery group, while Italy's Il Sole 24 Ore reported Ferrero had met private equity firms as well as Hershey to discuss a possible bid for Cadbury.
Philip Gijsels, senior equity strategist at Fortis Bank in Brussels, said major merger & acquisition deals would help lift the market.
"It is possible that we will see quite a bit of M&A this year because companies still have quite a bit of cash and those who are in (a) strong position would try to take advantage of those who are in weakness," Gijsels said. "What you will see is M&A between companies on a corporate level. You will not see the typical leverage buyouts driven by private equities which are difficult to get financing."
Across Europe, Britain's FTSE 100 put on 0.5 percent, Germany's DAX rose 0.8 percent and France's CAC 40 gained 0.9 percent.
OILS, BANKS HIGHER
Oil producers tracked firmer crude prices, which rose above $80 a barrel on news that Russia has halted oil supplies to Belarus, and on cold weather in the United States.
BP, Royal Dutch Shell and Total rose 0.9 to 1.2 percent.
Cairn Energy advanced 4.4 percent after the oil explorer said it has secured a second drilling rig for an exploration programme in Greenland.
Royal Bank of Scotland rose 3.8 percent and Lloyds Banking Group added 2.4 percent. The Sunday Times said Brazilian lender Itau Unibanco was considering buying stakes in one of the British banks rescued by the UK government during the financial crisis of 2008.
The banking sector, one of the best performers in 2009, was also firmer. HSBC, BNP Paribas, Barclays and Credit Suisse were up 0.9-1.3 percent.
Renault rose 3.5 percent. The carmaker expected the French car market to remain strong in the first half after it and its Dacia brand saw growth of over 90 percent in December, Renault senior vice president for France Bernard Cambier told BFM radio.
U.S. data on construction spending and ISM manufacturing PMI will be eyed later in the session, while data showed China's factories cranked up production in December on the back of bulging order books, but the strong demand also pushed prices higher and raised the spectre of inflation.
