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Sept. 21, 2006, 1:34 p.m. EDT

Telecom Shares Boost Markets

By Sarah Turner

European stock markets ended higher on Thursday, with automakers and chemicals companies getting a boost from oil futures trading near recent lows and from investors picking up beaten-down telecommunications stocks.

Cruise operator Carnival's (LON:UK:CCL) upbeat results gave a further lift to the travel sector.

The German DAX Xetra 30 index ended 0.1% higher at 5,962.

Deutsche Telekom, automaker BMW, chemicals company BASF and package holiday company Tui led the advance in Frankfurt, with losses for utilities E.ON and RWE putting a lid on the gains.

Similar moves were seen throughout Europe.

The French CAC-40 index rose 0.3% at 5,208 and the U.K. FTSE 100 index rose 0.5% at 5,896.

With crude-oil futures trading around $61 a barrel, companies that have been hurt by energy-price strength were in investors' sights.

Chemicals company BASF and automakers BMW and Volkswagen each rose more than 1%.

In the telecom sector, Deutsche Telekom gained 2.3% after reports said private-equity firm Blackstone wants the company's CEO to step down. However, a spokesman for Deutsche Telekom told AFX News they haven't received an indication Blackstone wants to take this action.

Also, France Telecom rose 1.8% after several reports it was no longer in the running to buy AOL U.K.

Specifics aside, analysts said the sector was bouncing back after a tough time. "(The move) is not to do with fundamental factors, but more a general improvement in sentiment. People are more convinced that the sector has bottomed out now and has even overreacted," said Heinke Pauls, a telecoms analyst at Commerzbank Corporates & Markets.

Deutsche Telekom had declined 14% this year heading into Thursday, with France Telecom down 17%.

The travel sector also provided gains, with Carnival (LON:UK:CCL) rising 5.6% after reporting a better-than-forecast 4% profit rise on demand for Alaskan and European cruises.

Tour operators rose on the news. Tui rose 4% in Frankfurt, and Switzerland's Kuoni rose 1.4%.

Turning to deal news, Merck KGaA agreed to buy Europe's largest biotechnology company, Serono, for $13.3 billion, just five months after the Swiss company took down the for-sale sign.

Merck, unrelated to the American drug maker of the same name, agreed to buy the Bertarelli family's 64.5% stake in Serono for 1,100 Swiss francs.

Serono closed 17.6% higher at 1,076 francs, while shares of Merck KgaA dropped 4.7%.

Shares in insurer Zurich Financial ended 2.1% higher at 294.68 francs following a report that St. Paul Travelers wanted to buy the company.

The U.S. insurer for the second time denied it was in talks to buy the Swiss insurer, causing Zurich shares to end off its high of 300.25 francs for the day.

Write to Sarah Turner at sarah.turner@dowjones.com

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