European stocks extend highs on insurers, bids

LONDON, Mar 17 (Reuters) Further takeover news helped boost European stocks half a percentage point to near five-year highs on Friday with Zurich Financial jumping and dragging insurance peers higher.

The Swiss group soared 8 per cent after the Wall Street Journal said St. Paul Travelers is discussing the possibility of a merger in what could be one of the largest acquisitions by a U.S. company in Europe.

By 1145 GMT (1715 IST), the FTSEurofirst 300 index of top European shares was up 0.55 per cent at 1,376.20, its highest level since July 2001.

Germany's DAX and France's CAC 40 rose 0.6 per cent while Britain's FTSE 100 jumped 0.7 per cent to hurdle 6,000 points to a five-year high.

Britain's Legal&General Group Plc also gained 8 per cent after beating analyst forecasts with a 43 per cent jump in 2005 profits, contributing to the DJ Stoxx insurance sector's 2.2 per cent rise.

''A combination of increased public awareness for the need to save for retirement, tentative signs of recovery in the housing market and strong investment performance aided by higher global stock markets have all combined to underpin today's figures,'' said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers.

''These above forecast results come on a day when the FTSE-100 index has breached the 6,000 barrier, further emphasising a key driver in the performance -- buoyant stockmarkets.

Vague bid talk also surrounded Britain's Prudential, which had already given insurers a boost with upbeat earnings on Thursday.

Bowman said takeover rumours could now envelop Legal&General after such good figures.

''Ongoing speculation around consolidation in the industry continues...and Legal's UK strength and market share could well eventually make it a potential target,'' he added.

VINCI BUILDS Elsewhere, Britain's beauty retalier Body Shop soared over 10 per cent after the French cosmetics company L'Oreal said it will buy the firm.

Construction group Vinci gained 5 per cent after JPMorgan raised its price target to 105 euros from 100 euros and kept its overweight rating while Commerzbank firmed as Morgan Stanley assumed coverage at overweight.

Shares in French media firm Vivendi Universal rose to 27.84 euros after UBS talked up a leveraged buyout.

''Vivendi looks attractive on an LBO analysis. We estimate that private equity firms could pay 32 euros per share,'' a UBS note said.

There was little impact to bourses as stock index options and futures expired mid-morning.

Among the few losers, French utility Suez dipped 1.5 per cent as Belgium's energy minister said the European Commission would probably carry out a four-month investigation into its planned merger with peer Gaz de France.

The University of Michigan's preliminary U.S. consumer sentiment index for March is the economic highlight later. U.S. stock futures were pointing to a mixed opening on Wall Street.

REUTERS SD PM1751