Danone and German DAX drive up European shares
* FTSEurofirst up 0.6 pct, Euro STOXX 50 rises 0.7 pct
* German ZEW boosts investor sentiment
* Danone surges after sales growth beats forecasts
* Italian elections still weighing on some investors
By Sudip Kar-Gupta
LONDON, Feb 19 (Reuters) - European shares rose on Tuesday, lifted by gains at food group Danone and fresh signs of a German economic recovery, although broader market sentiment remained cautious ahead of Italian elections this weekend.
The pan-European FTSEurofirst 300 index ended a three-day losing streak to advance 0.6 percent to 1,166.62 points by around midday, while the euro zone's blue-chip Euro STOXX 50 index rose 0.7 percent to 2,635.07 points.
Some traders and strategists have expected European equity markets to edge lower this month, partly on expectations that uncertainty over Italian elections this weekend might cause a pull-back on stock markets after they rallied in January.
However, Royal London Asset Management European equities fund manager Andrea Williams felt the Italian elections would result in a government likely to continue reforms to tackle Italy's debt problems, which would reassure investors.
Williams added that encouraging corporate results from Europe's top companies pointed to further gains for European equities this year.
According to Thomson Reuters Starmine data, 60 percent of the companies on the European STOXX 600 index to have reported fourth-quarter results have beaten or met market forecasts for those earnings figures.
"Italy is one more hurdle to overcome, but generally the corporate numbers that have been coming through have been quite good," said Williams.
Germany's DAX equity index rose 0.8 percent to 7,688.72 points, helped by the country's ZEW economic survey which showed that German investor sentiment had risen to its highest level in nearly three years in February.
A 2.7 percent rise in German chemical stock Bayer added the most points to the FTSEurofirst 300 index, which traders attributed to a price target upgrade on Bayer by UBS.
French group Danone topped the FTSEurofirst 300's leaderboard, rising 4.4 percent after its sales growth beat forecasts.
However, Danone added it would cut around 900 jobs in Europe to cope with a downturn in southern Europe, where countries such as Spain, Italy and Greece have been hit hardest by the euro zone's sovereign debt crisis and economic slump.
The FTSEurofirst has edged back around 1 percent from a 2013 high of 1,178.55 points since the start of February, as some investors use those lingering worries over the likes of Spain and Italy to sell shares and book a profit on January's gains.
Societe Generale strategist Arthur Van Slooten said this recent pullback could provide a buying opportunity in euro zone bank stocks and southern European shares, if the Italian election results in a government set to continue with reforms to fix Italy's debt burdens, as many expect.
Rob Jones, co-head of pan-European equities at Union Bancaire Privee (UBP), also said the longer-term outlook for European equities remained positive, although there may be some bumps along the road.
"We would expect European equity markets to make further progress in 2013 but we doubt that the trajectory will be in a straight line," he said.
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