ABN Amro Holding NV surged after the biggest Dutch bank said it is in takeover talks with Barclays Plc and on speculation more bidders may join. DaimlerChrysler paced automakers higher on speculation the German company moved closer to selling its unprofitable Chrysler unit.

The pan-European Dow Jones Stoxx 600 Index rebounded from a 2.3% slide in the previous week. The Stoxx 600 added 4.7% this week to 375.98, the biggest weekly gain since March, 2003. The Stoxx 50 rose 5% and the Euro Stoxx 50, a gauge for the 13 nations using the euro, climbed 5.2%.

ABN Amro has said it has started exclusive talks with Barclays about being taken over by the third-largest UK bank. The two lenders agreed later in the week on some terms, preparing what would be the biggest financialservices takeover in history. Barclays increased 11%, in part boosted by speculation the tie-up with ABN Amro may fail amid competition from other suitors and Barclays itself may become a target, according to Ian Gordon, an analyst at Dresdner Kleinwort in London.

So far this year, mergers and acquisitions in Europe have totaled $337bn, according to data compiled by Bloomberg. Deals reached a record $1.4 trillion in 2006. National benchmarks rose in all of the 18 western European markets last week. Germany's DAX added 4.9%, France's CAC 40 increased 4.7% and the UK's FTSE gained 3.4%.

The Fed kept the benchmark US interest rate at 5.25% on 21 March and unexpectedly abandoned its tilt toward higher borrowing costs in the world's largest economy.

The Open Market Committee omitted a previous reference to "additional firming" in favour of the more general "future policy adjustments" in its statement, giving central bankers more flexibility on the direction of interest rates. "That certainly supported stocks, " said Banque Bonhote's Demaurex.

DaimlerChrysler surged 15%. The shares were boosted by speculation the German carmaker may have moved closer to selling its Chrysler unit. Europe's thirdlargest auto-parts maker said it will look into a takeover approach from an investment firm it didn't identify.

Les Echos reported that Apollo Investment Corp may make a bid.

Volkswagen AG gained 13% on a report in Manager Magazine that Porsche family members have purchased as much as one-third of Volkswagen's preferred shares. Porsche said there was nothing to the story.

Fiat SpA added 7%. Italy's biggest carmaker announced a share buyback of as much as 1.4bn. Dresdner Kleinwort raised its price estimate on the shares 5% to 21.

Eiffage SA, France's thirdbiggest construction company, surged, leading the slew of companies boosted by takeover speculation. Sacyr Vallehermoso SA of Spain may make an approach, according to Frederic Boissel, a trader at Fimat in Paris and Andrew French, a sales trader at E*Trade Securities in London. The Financial Times reported that Vinci might mount a bid for Eiffage as a defence against a hostile leveraged buyout, citing speculation. Eiffage soared 40%.

"Acquisitions remain a good supporting factor for the markets, " Pictet's Lacraz said. "What we see is that the companies that are taking over are trying to set sound "nancial conditions to get decent returns."