Europe shares extend rally

PARIS, Apr 5 (Reuters): European stocks rose on Friday, boosted by M&A fever in construction, speculation about further stimulus by the European Central Bank (ECB) and US jobs data that suggested a solid pace of hiring for a second month in a row.

Shares in Lafarge surged 8.9 per cent and Holcim rose 6.9 per cent as the world's two largest cement makers said they are in merger talks. A deal could be Europe's biggest tie-up of the year to date creating a company with a stock market value of over $50 billion.

"On a geographical and industrial point of view, a merger would be meaningful," Natixis analyst Abdelkader Benchiha said. "Lafarge is strong is Africa and Middle East, where Holcim is almost absent. On the other hand, Holcim has a strong presence in Latin America, where Lafarge is not established."

Spanish and Italian shares also featured among the top gainers. Their advance accelerated during a late euro-zone rally sparked by a report that the European Central Bank has modelled the economic effects of buying 1 trillion euros ($1.37 trillion) of securities as part of a quantitative easing (QE) programme.

The Frankfurter Allgemeine Zeitung reported the ECB had estimated that buying 1 trillion euros of assets over a year would add 0.2 or 0.8 percentage points to inflation, depending on the economic models used.

"The question would be whether the private debt market in Europe is big enough for QE," the newspaper quoted someone whom it described as a central bank insider as saying.

The FTSEurofirst 300 index of top European shares ended 0.6 per cent higher at 1,352.78 points, gaining ground for the ninth session in a row and hitting its highest level in 5 1/2 years.