Euronext returns €1bn and renews Deutsche pursuit

The Paris-based bourse also said it would hand back €1bn (£688m) to shareholders, in effect emptying a financial war chest it had built to pursue a bid for the London Stock Exchange.

Nasdaq made an informal £2.4bn approach to the LSE last week, and will begin meeting its major shareholders in the next few days in the hope of winning support for the bid.

Euronext, which combines the French, Belgian, Dutch and Spanish stock markets, had expressed its interest in the LSE last year, but signalled yesterday that its focus had shifted to a merger with Frankfurt.

Euronext said it was "pleased to hear" it was Deutsche Börse's preferred partner. "While there are differences between the respective business models and views, Euronext welcomes the invitation to discuss these issues and intends to work constructively with Deutsche Börse to try to find creative solutions to bridge the gaps," it said.

Talks between Deutsche Börse's chief executive, Reto Francioni, and his counterpart at Euronext, Jean-François Théodore have been fraught. The pair have clashed repeatedly over price, over the location of the company's headquarters, and who should run it. But the negotiations have been given new impetus by the prospect of the LSE combining with Nasdaq or the New York Stock Exchange, which is mulling a bid.

There was an important signal yesterday that European politicians would not throw up nationalist objections to a merger of Euronext and Deutsche Börse. Angela Merkel, the German Chancellor, and the French President Jacques Chirac described the prospect of a deal as a potentially positive example of Franco-German co-operation.