June 7 (Bloomberg) -- European stocks recovered some of their two-day slide, lifted by speculation about takeovers. GlaxoSmithKline Plc rose as people familiar with the situation said the drugmaker bid for Pfizer Inc.'s consumer unit.

Inmobiliaria Colonial SA surged after the real-estate company agreed to be sold for almost $5 billion. Nestle SA and E.ON AG, the world's largest foodmaker and utility respectively, led gains among so-called defensive stocks, whose earnings are less dependent on economic growth.

The Dow Jones Stoxx 600 Index, which closed at a two-week low yesterday, gained 0.4 percent to 313.80 at 2:34 p.m. in London. The Stoxx 50 added 0.7 percent, as did the Euro Stoxx 50 Index for the 12 nations using the euro.

``In an environment of low returns, M&A activity should allow certain sectors to outperform,'' said Rupert Cecil, head of U.K. equities at Kleinwort Benson, where he helps manage $13 billion. ``Investors are now turning their backs on sectors such as the miners and moving into more defensive stocks.''

Stocks slid yesterday after comments by Federal Reserve Chairman Ben S. Bernanke the day before suggested U.S. rates may keep rising. Concerns about inflation and increasing rates worldwide have roiled markets for a month.

Vedanta Resources Plc, India's largest copper producer, and Sweden's Boliden AB dropped with copper prices. DaimlerChrysler AG led a decline by automakers. Both mining and auto shares have declined for three days.

``Optimism is starting to fade a little bit that we were going to get a sharp bounce back from recent losses,'' said Mark Bon, who helps manage the equivalent of $14 billion at Canada Life in London. ``Investors are reevaluating growth prospects. The interest-rate environment is less favorable than it was.''

Retail Sales

National benchmarks gained in 13 of the 18 western European markets. France's CAC 40 rose 0.2 percent, while Germany's DAX added 0.6 percent. The U.K.'s FTSE 100 gained 0.5 percent.

European retail sales rose in May by the most in more than two years as spending on sports gear and flat-screen televisions spurred expansion in the $10 trillion economy, the Bloomberg purchasing managers' index showed.

The European Central Bank is set to raise interest rates for the third time in six months tomorrow to put a lid on prices as growth accelerates.

Glaxo, Colonial, Resolution

Glaxo, the maker of Tums antacids and Aquafresh toothpaste, rose 1.8 percent to 1,514 pence. The company has offered at least $15 billion for Pfizer Inc.'s consumer unit, one of several bids received by the U.S. company, people familiar with the negotiations said.

Johnson & Johnson and the U.K.'s Reckitt Benckiser Plc offered more than $14 billion, the New York Times said today. Shares of Reckitt, the world's largest maker of household cleaners, gained 1.1 percent to 1,977 pence.

Colonial surged 8.9 percent to 61.80 euros. Grupo Inmocaral SA offered to buy the Spanish real estate company for 3.76 billion euros ($4.82 billion), or 63 euros a share.

Resolution Plc, Britain's biggest administrator of life insurance funds that are closed to new business, climbed 5.5 percent to 713 pence after announcing the purchase of Abbey National life units for 3.6 billion pounds ($6.7 billion). Santander Central Hispano SA, Abbey National's owner, added 0.9 percent to 11 euros.

Resolution will increase its assets under management by 72 percent to about 63 billion pounds with the purchase.

PagesJaunes, Vivendi

PagesJaunes SA added 1.3 percent to 22.82 euros. France Telecom SA plans to sell part or all of its stake in the yellow- pages publisher after declaring the unit isn't part of its main strategy. France Telecom rose 1.6 percent to 17.48 euros.

NeuTec Pharma Plc jumped 19 percent to 1,100.25 pence. Novartis AG, Europe's third-largest drugmaker, offered to buy the company for 305 million pounds ($569 million) in cash to gain two experimental treatments for drug-resistant infections.

Novartis shares rose 0.3 percent to 67.10 Swiss francs. NeuTec shares surged 84 percent yesterday, when it said it was in takeover talks.

Vivendi SA gained 1.5 percent to 28 euros. Shareholder Sebastian Holdings, controlled by investor Alexander Vik, said it may make an offer for the French company and said its current strategy destroys value. Vivendi, the owner of the world's largest record label and mobile-phone network SFR, rejected a plan by Sebastian to break up the company last month.

Suez Speculation

Suez SA, France's second-largest utility, gained 2.4 percent to 29.90 euros. Enel SpA, Italy's biggest power company, hasn't ruled out the possibility of purchasing Suez SA, Corriere della Sera reported, citing an interview with Chief Executive Officer Fulvio Conti. The company also said it pursue other acquisition targets in Europe.

A credit line provided by a group of banks for a possible Suez purchase is still in place and has no time expiration, Conti said. Enel gained 1.5 percent to 7.165 euros.

E.ON AG, the world's largest utility, added 1.4 percent to 87.49 euros. Endesa SA, Spain's biggest power company, advanced 1.8 percent to 26.15 euros.

Nestle, the world's biggest food company, gained 1.7 percent to 366 Swiss francs. Unilever Plc, the maker of Ben & Jerry's ice cream, added 0.5 percent to 1,177. Diageo Plc, the world's largest liquor maker, rose 1.6 percent to 908 pence.

Investors are ``moving into defensive stocks,'' those that ``are almost completely independent of the economic cycle,'' said Patrick Brechbuehl, a fund manager at Swiss Life Asset Management in Zurich, which manages about $70 billion.

Telekom Austria led telecommunication stocks higher. The country's biggest phone company rose 2.7 percent to 17.72 euros. Mobistar SA, Belgium's second-biggest mobile-phone company, advanced 2.3 percent to 61.85 euros.

DaimlerChrysler AG, the world's No. 5 carmaker, led a slide by the Stoxx 600's group of auto companies, losing 0.2 percent to 38.25 euros. Volkswagen AG, Europe's biggest carmaker, slid 0.6 percent to 51.71 euros.

Mining Decline

Vedanta tumbled 2.7 percent to 1,251 pence in London. Boliden AB, Scandinavia's only copper producer, retreated 8.5 percent to 124.5 kronor.

Antofagasta Plc, the London-based owner of copper mines in Chile, lost 1.4 percent to 1,931. Anglo American Plc, the world's No. 2 mining company, lost 1 percent to 1,972 pence.

Copper fell to a two-week low in London as investors who track a basket of commodities cut their holdings because gold prices dropped. Gold for immediate delivery in London fell $10.25 to $620.40 an ounce.

PartyGaming Plc, the world's largest Internet poker company, lost 4.7 percent to 116.5 pence. Dresdner Kleinwort Wasserstein is selling 350 million shares in the company at near-market price, bankers familiar with the transaction said.

Swiss Reinsurance Co., the world's second-largest reinsurer, slid 2.5 percent to 82.35 francs. Goldman Sachs Group Inc. is selling shares of Swiss Re for about 486 million Swiss francs ($398 million).

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To contact the reporter on this story:
Sarah Jones in London at  sjones35@bloomberg.net;