FRANKFURT -- Mergers again dominated Monday in Europe, lifting markets to solid gains.

Societe Generale

agreed to merge with

Paribas

in a $17.2 billion stock deal creating

SG Paribas

, which would become one of Europe's largest banks along with

UBS

and

Deutsche Bank

.

Trading of both Societe Generale and Paribas was suspended until later this afternoon, but the merger news sent other bank shares higher.

Banque Nationale de Paris

was up 6%,

Barclays

(BCS) - Get Report

up 4.3% and

Commerzbank

up 4%.

Also in merger news, U.K. insurance firm

Guardian Royal Exchange

has agreed to a $5.6 billion takeover by French insurance group

Axa

(AXA)

. Axa is making the purchase through

Sun Life & Provincial Holdings

, in which it owns a 72% stake. Guardian Royal was down 0.5%, while Axa was up 1.3%.

But Germany insurers benefitted from the news, with

Allianz

up 4.3%and

Muenchner Rueck

up 4.8%.

In Frankfurt, the

Xetra Dax

was up 98 points, or 1.9%, at 5278, while in London the

FTSE

was up 116, or 2%, at 6012 and in Paris the

CAC

was up 76, or 1.8%, at 4328.

In addition to merger fever, the stock market was underpinned by continued dollar strength. European exporters benefit from a strong dollar. The euro was last bid at $1.1358, and against the yen the dollar was at 116.30. The U.S. long bond was yielding 5.08%.

Despite the strong gains across Europe, some investors want to see what kind of mood Wall Street is in. Stocks indices here have spent the last few hours hovering in fairly tight ranges ahead of New York's open.

S&P 500

futures were last up 4.50 points at 1286.

There was little discussion here of a weekend comment from

Microsoft

(MSFT) - Get Report

chief

Bill Gates

. At the World Economic Forum in Davos, Switzerland, the Mister Softee CEO became the latest to bash sky-high Internet stock valuations, saying that he did not recommend Web stocks "to people who don't like massive risk."

Fed

chief

Alan Greenspan

was fretting last week about Internet valuations.

And if contrarians were seeking another reason to buy Internet stocks, they got it from the latest edition of the

The Economist

, which warned in a cover story: "Why Internet shares will fall to earth."

Today's gains in Europe, combined with a strong finish at the end of January, have transformed some cautious bears into cautious bulls. Nick Glydon, technical analyst at

Robert Fleming Securities

in London, said, "The bears are giving up slowly."

Glydon said that he has been focusing on the January performance of major indices. Believers of the so-called January barometer, which holds that indices posting a gain in January will do so for the year, should be encouraged. Glydon said that last month the CAC gained 7.8%, the Dax rose 3.5% and the FTSE 100 edged up 0.2%. Major U.S. indices also were winners in January.

But Glydon said he remained cautious, awaiting confirmation of a fresh bull trend from the CAC. If the CAC can take out its closing record high of 4388 set last summer, he expects a powerful rally across Europe.

"I am waiting with my finger on the buy button," he said.