Meanwhile, shares in firms engaged in construction slid last week amid fears of a housing slowdown with Readymix admitting on Friday that a reduction in home building had hit its profits for the first half of this year.

It finished the week down 7% at 2.18 a share while Kingspan declined by almost 10% during the week to 18.45 and McInerney Holdings fell almost 12% to finish the week at 2.02.

Meanwhile, across Europe, stocks advanced after Groupe Danone, the world's biggest yogurt maker, offered to buy Royal Numico and mergers and acquisitions speculation drove shares of Unilever, Hagemeyer and Air Liquide higher.

Numico surged 34% after Danone offered to buy it for 12.3bn in cash to gain the biggest share of Europe's babyfood market. Its price is 38% more than last week's close.

However, Danone stock tumbled 7.3%.

In Amsterdam, Unilever jumped 4.8% to its highest level in eight years on speculation that the world's second-largest maker of food and detergent may combine with ColgatePalmolive.

Meanwhile, shares in the world's second-biggest maker of industrial gases, Air Liquide, rose the most in four and a half years last week on speculation that buyout firm Kohlberg Kravis Roberts & Co may bid for the company.

"Private-equity rumours in connection with Air Liquide are constantly around and I wouldn't rule it out, " said Juergen Reck, an analyst at Sal.

Oppenheim in Cologne.

Xstrata and BHP Billiton paced gains in mining shares after Rio Tinto Group's $38.1bn purchase of Canada's Alcan sparked takeover speculation in the industry.

Takeovers in Europe have reached $1.46 trillion this year, compared with a record $1.6 trillion in 2006, according to data compiled by Bloomberg.

"We've achieved almost the entire size of last year's deals in Europe so far this year, " said Franz Wenzel, deputy director of investment strategy at Axa Investment Managers in Paris, which oversees $757bn. "It will continue. M&A is going to drive markets higher."

However, concern that US mortgage losses will hurt the world's biggest economy and slow global economic growth limited the Dow Jones Stoxx 600 Index's gains. Moody's Investors Service cut the credit ratings on $5.2bn of bonds backed by sub-prime mortgages on Tuesday, while Standard & Poor's said it may downgrade $12bn of securities.

Indeed, bank stocks had the fourth-worst performance on the Stoxx 600. Deutsche Bank, Germany's biggest bank, slid 0.9%. Societe Generale, France's third-largest bank, declined 2.1% and UniCredit, Italy's biggest bank, fell 1.9%.

Meanwhile, carmakers fell as oil prices rose. Renault, France's second-largest carmaker, slid 2.9%. Volkswagen, Europe's biggest carmaker, slipped 0.7%.

PSA Peugeot Citroen, Europe's second-biggest, dropped 1.7%.

Crude oil reached $73.80 in New York on Thursday, its highest intraday price since last August, while crude touched an 11-month high in London on Friday.