Big mergers and acquisitions deals fuelled consolidation expectations and helped European stocks gain ground on Monday after a two-session dip.
Shares in Irish drugmaker Elan jumped 9 percent after U.S. peer Perrigo agreed to buy the firm for $8.6 billion, sparking a rally in pharma stocks, with Shire up 1.5 percent and Qiagen up 1 percent.
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Media shares also surged, boosted by a merger plan between Publicis and Omnicom unveiled over the weekend, in a deal worth $35.1 billion. France's Havas soared 6.3 percent and UK's WPP added 1.5 percent. Publicis shares were halted on Monday.
The FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,207.40 points, after losing about 0.8 percent in two sessions. The benchmark index has risen 9 percent since late June.
"It's Merger Monday. Money is cheap, companies are sitting on piles of cash, and finally some of them are looking for deals," said David Noble, a specialist trader at Louis Capital Markets in London.
Also among the biggest gainers on Monday, ophthalmic optics firm Essilor rose 4.8 percent after buying a stake in photochromic lens unit Transitions Optical from PPG Industries Inc for $1.7 billion.
Despite the number of high-profile deals unveiled over the past 10 days, European merger activity remains subdued, with the 12-month rolling average running at around $160 billion, down from about $240 billion at its 2007-2008 peak, according to Thomson Reuters Datastream.
French food group Danone gained 3.1 percent after saying sales growth accelerated in the second quarter. It kept its full-year 2013 profit and sales outlook.
Around Europe, UK's FTSE 100 index, Germany's DAX index and France's CAC 40 were all up 0.3 percent. The euro zone's Euro STOXX 50 index was up 0.2 percent at 2,747.69 points.
"I'm quite positive, the market goes up slowly with some consolidation moves happening during the session," TradingSat analyst Alexandre Tixier said.
"Trading volumes remain brisk, which is a sign of strong buying appetite at this point. Our exposure to equities is at 80 percent right now."
Bucking the trend, worries of a capital hike by UK lender Barclays prompted investors to book profits on banking stocks. Barclays was down 3.7 percent, Commerzbank down 1.9 percent and Banco Popolare down 1.7 percent.
The STOXX Europe 600 banking index has gained 13 percent since late June, outpacing the FTSEurofirst 300 which has risen 8.4 percent over the same period.