The Dow Jones Stoxx 600 Index added 0.8% to 383.33, the highest since 8 November 2000. All industry groups advanced. The Stoxx 50 increased 1.3%, and the Euro Stoxx 50 gained 1.1%.

So far this year, the value of takeovers and mergers in Europe has reached $621bn, according to data compiled by Bloomberg. Deals reached a record $1.6 trillion in 2006.

Estimates for 2007 earnings growth of Stoxx 600 companies fell to 5.6% from 8% at the beginning of the year, according to data compiled and released by FactSet Research Systems last week.

Stocks extended gains after the US government reported so-called core producer prices that exclude fuel and food were unexpectedly unchanged in March. That suggests the Federal Reserve may have room to cut interest rates to boost economic growth.

The International Monetary Fund on Wednesday cut its forecast for US economic growth in 2007 to 2.2%, the slowest expansion in "ve years, on a weakening housing market. The European Central Bank left rates unchanged on Thursday.

National benchmarks gained in all 18 western European markets except Spain. Germany's DAX added 1.6%, and France's CAC 40 rose 0.8%. The UK's FTSE 100 advanced 1%.

"M&A is driving the stock markets higher, " said Philipp Musil, who helps oversee $24bn at Constantia Privatbank in Vienna.

Oil stocks posted the biggest gain among the 18 Stoxx 600 industry groups. Crude oil traded near $64 a barrel in New York on expectations US gasoline consumption will spur demand for crude as stockpiles of the fuel decline. Citigroup raised its recommendation on Europe's oil and gas industry to 'overweight' from 'underweight'.

Shell, Europe's biggest oil company, added 2.7% . BP, the second-largest, rose 3.9%. OMV, central Europe's No 1 oil company, advanced 4.3%. Statoil, Norway's largest oil and gas company, climbed 2.3%. To t a l , Europe's largest re"ner, gained 1.9%.

GlaxoSmithKline led healthcare stocks higher. Europe's largest pharmaceutical maker climbed 3.3% after gaining US approval to sell a new ointment for a skin infection. Faes Farma increased 6.4%. The Spanish drug developer sold a licence to market its allergy treatment in Europe once it wins approval.

Next week the earnings season picks up pace in Europe with Royal Philips Electronics, the No 1 maker of electric shavers and light bulbs, and SAP, the world's largest maker of business-management software, reporting "rst-quarter results.

The Germany-based ZEW Centre for European Economic Research will publish its data on investor con"dence in the region's largest economy on Tuesday.

Philips may say tomorrow that "rst-quarter pro"t jumped more than "vefold to Euro832.3m. SAP will report earnings on Friday. A US labour department report on Tuesday may show US consumer prices rose 0.6% last month.

Bloomberg