Bounce back of European shares

Europe's main stock markets closed sharply higher on Thursday after recent heavy losses, with mining stocks boosted by news of Rio Tinto's mammoth $38.1bn takeover bid for Canadian group Alcan, dealers said.

Sentiment in Europe was also helped by a strong start to trading on Wall Street, but was dampened by the rising euro, which struck new record highs against the dollar and the yen.

The London FTSE 100 index closed 1.25% higher at 6 697.70 points, in Paris the CAC 40 jumped by 1.70% to finish at 6 103.05, while in Frankfurt the Dax added 1.96% to end the day at 8 053.43 points.

The DJ Euro Stoxx 50 index of leading eurozone shares gained 1.58% to 4 517.70 points.

The euro hit a record $1.3798 on Thursday with the European single currency boosted by economic concerns in the United States and the prospect of rising interest rates in the eurozone.

European equities have fallen heavily over the past two days as investors fretted over the troubled US housing sector and the strong European currency, which penalises European exporters.

In Europe, the mining sector was in focus.

Anglo-Australian miner Rio Tinto offered $38.1bn for Canada's aluminium group Alcan on Thursday, trumping a rival bid from US group Alcoa.

The proposed merger would create the world's largest aluminium company.

As consolidation in the booming metals sector continues, Rio Tinto and Alcan said in a joint statement they would combine to form the world's largest aluminium company, to be named Rio Tinto Alcan and based in Montreal.

In London on Thursday, however, Rio Tinto shares plunged 4.58%.

"This is almost certainly a knock-out bid, and I'll be surprised if Alcoa comes back with a counter offer," Teather and Greenwood mining analyst Martin Potts said.

Other mining groups gained strongly, with Antofagasta up 6.39%, Xstrata up 4.67% and Vedanta Resources up 6.45%.

Shares in Lonmin gained 3.57% while Kazakhmys rose 3.87%.

In the energy sector, shares in French oil and gas company Total rose 3.02% after Russian gas monopoly Gazprom said it had chosen the company as its partner to develop the Shtokman gas field, one of the few known but untapped giant gas reserves in the world.

Elsewhere in Europe, in Madrid the Ibex 35 added 1.19% to 14 941.8 points, in Amsterdam the AEX index rose 1.19% to 560.14, in Milan the SP/Mib index gained 0.83% to 42 140, while in Brussels the Bel 20 climbed 1.01% to 4,636.57 points.

The Swiss SMI index rose 0.37 percent to 9 248.51 points.