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Europe: M&A talk, oil helps European shares stay close to 11-month highs

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[LONDON] European shares marked a second week of gains on Friday with merger and acquisition speculation around drug maker Actelion and a rally among oil stocks helping the region's benchmark index stay near 11-month highs.

The pan-European Stoxx 600 index moved in and out of positive territory to close 0.3 per cent higher.

The index has gained 6 per cent in the past two weeks, boosted by a rally in battered banking stocks on expectations that rising bond yields would ease margin pressure and helped further by the strengthening of the US dollar.

Actelion soared 10.5 per cent to hit fresh record highs, making it the biggest gainer on the Stoxx.

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People close to the matter, cited by Bloomberg, said its French rival Sanofi was discussing a price of about US$275 per share to take over the Swiss drugmaker in a deal that could come as soon as next week.

Continued talk about a potential deal also raised hopes of further consolidation in an industry that faces pricing pressure in the US and whose share price valuations look expensive when compared to cyclical sectors such as banks.

"This deal also underlines the strong M&A activity in this sector, which can also be expected to continue in the medium term," BayerLB analyst Miraji Othman said in a note.

Generali rose as much as 5.2 per cent with traders citing fresh media talk about a possible bid from Germany's Allianz for the Italian insurer's French business.

Generali's shares fell back to close 1.6 per cent higher after three people close to the situation said that it did not intend to sell its French business.

Oil stocks were the biggest sectoral gainers, up 1.5 per cent hitting their highest level since June 2015 after the underlying oil price was boosted by signs of producers adhering to a global deal to reduce output.

Banks were on the back foot, down 0.3 per cent, after hitting their highest since January on Thursday.

Monte dei Paschi di Siena rose 1.3 per cent. The troubled Italian lender opened its offer for a debt to equity conversion to retail investors, a major part of a privately-funded rescue of the troubled bank.

Should the plan fail, the Italian government is ready to step in with state money to keep the bank in business, though that would require private investors to share in losses.

Other big movers included OCI, which jumped 8.7 per cent after broker Kepler Cheuvreux started its coverage of the stock with a "buy" rating.

Online takeaway company Just Eat fell 4.7 per cent, leading fallers on the Stoxx after BAML downgraded it to "neutral".