European stocks ended yesterday flat despite a wave of takeover activity as a lower-than-expected indicator of US consumer sentiment cast a pall, but insurance shares rose on merger speculation.

Insurance stocks rallied as the Wall Street Journal said Zurich Financial was in talks with St Paul Travelers, while aiports operator BAA dropped after rejecting Grupo Ferrovial's £8.8 billion bid.

The FTSEurofirst 300 index of top European shares closed unofficially up 0.04 per cent at 1,369.22. The index has gained around one per cent this week to trade at its highest levels since July 2001.

"Am I comfortable with valuations? On a general note, yes. With interest rates where they are and the macroeconomic circumstances, I don't see why we should drop dramatically," said Victor Polak, portfolio manager at Citigroup's wealth advisory division.

The M&A spurt "suggests companies think the future is pretty positive," he added.

Germany's DAX eased 0.3 per cent, while France's CAC 40 rose 0.3 per cent and Britain's FTSE 100 ended up 0.1 per cent after earlier hurdling over 6,000 points to a five-year high.

US consumer sentiment held steady in March, with the University of Michigan's preliminary March index reading 86.7, unchanged from the previous month, but below Wall Street economists's forecast for a rise to 88.0.

The Dow Jones Insurance index gained 1.5 per cent, with Zurich up five per cent and hopes of further sector consolidation propelling Prudential up 7.1 per cent.

Forecast-beating earnings helped pushed Legal & General up 7.1 per cent.

"Ongoing speculation around consolidation in the industry continues... and Legal's UK strength and market share could well eventually make it a potential target," said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers.

BAA dropped 1.3 per cent after shunning Ferrovial's offer, while British beauty retalier Body Shop soared more than 10 per cent after French cosmetics company L'Oreal said it would pay $1.1 billion for the firm.

Mobile phone giant Vodafone slipped 0.4 per cent after the sale of its Japanese unit for $15.5 billion to Softbank disappointed investors who were hoping a bidding war would erupt for the business.

Construction group Vinci gained six per cent after JPMorgan raised its price target to €105 from €100 and kept its overweight rating while Commerzbank firmed 5.7 per cent as Morgan Stanley assumed coverage at "overweight".

Shares in French media firm Vivendi Universal rose 1.1 per cent after UBS speculated about a leveraged buyout.

"Vivendi looks attractive on an LBO analysis. We estimate that private equity firms could pay €32 per share," a UBS note said.

Heavyweight miners fell out of favour despite copper reaching fresh record highs in New York, with BHP Billiton down 1.4 per cent and Anglo American slipping 1.5 percent.

Also on the downside, French utility Suez dipped 1.5 per cent as Belgium's Energy Minister said the European Commission would probably carry out a four-month investigation into its planned merger with Gaz de France.

There was little impact to bourses as stock index options and futures expired mid-morning.

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