STOCKS NEWS EUROPE-Valeo surges as Merrill ups to "buy"

Shares in French carparts group Valeo (VLOF.PA) surge 7 percent, the top gainers on Paris's broad SBF120 index .SBF120, as traders cite a rating upgrade from Merrill Lynch.

Merrill ups its recommendation on the stock to "buy" from "neutral", and raises its price target to 20 euros from 15 euros to reflect the brokerage's higher earnings forecast for 2009-2011.

"Valeo has been a relative underperformer versus most of its auto components' peers. We expect this trend to reverse with earnings momentum improving with European car production prospects," Merrill analysts write in a note.

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