February 07, 2008	Thursday	Muharram 28, 1429

FRANKFURT, Feb 6: European shares recovered in choppy trade on Wednesday from the previous session’s sharp decline, lifted by gains in utilities and telecom stocks while merger and acquisition activity moved into focus again.

Bid talk led shares in France’s second-largest bank Societe Generale higher amid an otherwise weak financial sector. Traders speculated about a potential bid by HSBC ahead of SocGen’s planned capital increase. HSBC declined to comment.

SocGen, hit by a massive trading scandal, has been the subject of bid speculation over the past two weeks.Shares in miner BHP Billiton were the main drag on the pan-European FTSEurofirst 300 index, falling 4.8 per cent after bid target Rio Tinto rejected a sweetened all-share bid from the rival mining group BHP Billiton.The European benchmark index closed 0.6 per cent higher at 1,322.00 points, having hit an intraday low at 1,303.02 points.

The index tumbled 3.1 per cent on Tuesday after weak US macroeconomic data sparked a fresh wave of selling on bourses around the world. The index has lost nearly 13 per cent since the start of the year and is down about 20 per cent since reaching a multi-year high last summer.

Many analysts consider a fall of 20 per cent from a peak as signalling a bear market.

Recent US data has reinforced the view that the US economy is heading for recession. Barclays Wealth Research said in a monthly investment strategy report the chances of this happening had risen to close to 50:50.

But it added: “However, it is looking increasingly as if any slowdown will be short-lived.” “Europe cannot escape the effects of a United States recession, if there is one. Consequently, we expect pressure on the ECB to cut interest rates to build,” it said.

Thomas Teetz, head of equity research at HSBC Trinkaus, said he was still bullish, but expected to see more troughs in the market in the short term. “Hence cash is king for now,” he said.

“What investors love at the moment are very clear business models,” he said, adding that the focus currently was on defensive stocks.

Utilities, food producers and telecoms were among the top gainers in Europe, also driven by bid talk.

Shares in Tiscali rose as much as 9 per cent as traders cited market talk Britain’s Vodafone would bid for the Italian Internet service provider. Tiscali declined to comment and Vodafone was not immediately available for comment. Around Europe, Germany’s DAX index rose 1.2 per cent and was the strongest performing index among its European peers with Deutsche Postbank gaining 10 percent after a newspaper report sparked fresh takeover speculation.

France’s CAC 40 gained 0.8 percent and the UK’s FTSE 100 index added 0.1 per cent.

—Reuters