European stocks climbed for a fifth week after takeover offers for Hagemeyer NV, Burren Energy Plc and Business Objects SA added to evidence that mergers and acquisitions are recovering from a summer slump.

Telefonica SA led a gain in phone shares after forecasting higher profit and dividends, while energy companies including Royal Dutch Shell Plc rose with oil prices. Northern Rock Plc, the beleaguered UK mortgage lender, soared as it attracted investors from hedge funds to UK billionaire Richard Branson, Bloomberg News said.

"Confidence continues to be restored by a mixture of good corporate news and a resumption of a big driver for equities, that of takeovers," said Henk Potts, who helps oversee US$45 billion at Barclays Stockbrokers in London.

The Dow Jones Stoxx 600 Index added one percent to 390.63 in the five days, capping the longest streak of weekly gains since October 2006. The measure has rallied 11 percent since reaching a five-month low on August 16 as investors bet that profit growth and takeover deals will weather rising debt defaults and a slump in the US housing market.

Banks including Societe Generale SA limited the advance amid concern that earnings in the financial industry this quarter will reflect recent difficulties in credit markets.

National benchmarks gained in all 18 western European markets except Ireland. The UK's FTSE 100 jumped 2.1 percent, while Germany's DAX Index added 0.5 percent. France's CAC 40 Index rose less than 0.1 percent. The Stoxx 50 edged up 0.7 percent and the Euro Stoxx 50, a measure for the euro region, gained 0.5 percent.

Mergers and acquisitions are picking up after the US subprime-mortgage collapse brought credit markets to a standstill in July and August. Some US$90 billion in new deals were announced in the first week of October, almost half the total in September.

Hagemeyer, the world's biggest distributor of electrical sockets and switches, soared 28 percent after Sonepar SA said it plans to buy the Dutch company for 2.51 billion euros (US$3.5 billion). The closely held French company bid 4.25 euros a share, 57 percent more than the September 27 close, before takeover speculation began. Hagemeyer rejected the offer as too low.