European energy shares outperformed other sectors on Wednesday after Royal Dutch Shell's $70 billion bid for BG sparked a rally. The STOXX Europe 600 Oil & Gas Index, hammered over the past year as oil prices tumbled, closed up 2.5 percent to outperform the pan-European FTSEurofirst 300 index which ended flat at 1,611.68 points.
BG shares jumped 26.7 percent, Tullow Oil climbed 4.4 percent and BP gained 0.5 percent. Royal Dutch Shell fell 5.3 percent, reflecting the premium it is paying for BG.
"The sector has been ripe for consolidation given the bearish outlook for oil prices, and we could see other take-overs in the industry in the coming weeks and months. Overall, the M&A wave which is spreading to a number of sectors is very good for the market," said Saxo Bank trader Andrea Tueni.
Germany's DAX, which hit a record high of 12,219.05 points last month, fell 0.7 percent to 12,035.86 points, pulled down by auto stocks. These have risen sharply this year but gave up some of their gains on Wednesday after a number of brokers raised doubts about valuation ratios. BMW fell 1.4 percent while Daimler retreated 1.3 percent.
The Greek stock market also fell 1.2 percent, which traders attributed to nervousness the day before a deadline for Greece to repay a loan to the International Monetary Fund.
However, investors said the backdrop of a pick-up in mergers and acquisitions (M&A) would allow European stock markets to remain near multi-year highs while traders anticipated solid first-quarter results from European companies.
First-quarter earnings for the pan-European STOXX 600 index are projected to rise 0.4 percent from a year ago, according to Thomson Reuters data.
Shell's move for BG came a day after FedEx's 4.4 billion-euro ($4.8 billion) bid for Dutch package delivery firm TNT Express sparked a rally in that sector.
Shares in Swiss bank Julius Baer also touched a record high as traders cited speculation of a possible bid for Baer by Credit Suisse. Credit Suisse and Baer declined to comment.