The major European indexes closed in broadly positive territory Tuesday as merger and acquisition activity returned and signaled an easing to the recent credit crisis.
Meanwhile, European Central Bank President Jean-Claude Trichet reiterated his willingness to act if the credit turmoil were to hurt the euro-zone economy. At the same time Trichet said inflationary pressures remain, casting doubt on a near-term rate cut.
"The new economic data have confirmed our view that risks to price stability remain on the upside in the medium term," Trichet said during a testimony at a European Parliament panel.
In corporate news, French electronic group Sonepar said it planned to offer 4.25 euros ($5.99) a share in cash for Dutch electrical parts distributor Hagemeyer. The deal is worth about 2.5 billion euros ($3.36 billion) based on the number of Hagemeyer shares outstanding.
Shares of Hagemeyer finished more than 8% higher.
And shares in Sanofi-Aventis closed higher by 2.1% in a slightly positive CAC-40 as the drugmarker gained on speculation that Pfizer was looking to buy a stake in company from its shareholders, Reuters reported.
In another potential deal, Munich Re is interested in buying an online auto insurance unit from South Korea's top Internet portal Daum Communications.
London's FTSE-100 remained firmly in the green following a pre-budget report from Alistair Darling, in which the U.K. Chancellor of the Exchequer revised down Britain's growth forecast for 2008.
Northern Rock helped the FTSE's positive momentum by adding an 19.8% gain. The U.K. mortgage lender announced it extended financing arrangement to guarantee all retail deposits made after Sept. 19 and confirmed that it appointed Citigroup to join Merrill Lynch in advising on strategic options, a process that is expected to last until 2008. The Financial Times reported Tuesday that buyout firm Lone Star joined the list of suitors for the struggling mortgage lender.
And looking to economic news, Germany's trade surplus narrowed more than expected, the government said, due to a sharp rise in imports. The Frankfurt DAX closed largely flat.