* FTSEurofirst 300 up 1.1 pct, Euro STOXX 50 up 1.3 pct
* Euro STOXX 50 breaks above resistance level at 2,650 pts
* Vodafone surges 5 percent on renewed M&A talk
* Miners fall along with metal prices on demand worries
By Blaise Robinson
PARIS, April 2 European shares rallied on
Tuesday, bouncing after a two-week slide and with a blue chip
index breaking above a resistance level, as M&A activity helped
Vodafone, the world's second largest mobile
operator, surged 5 percent, boosted by a report saying U.S.
firms Verizon Communications and AT&T have been
working together on a break-up bid for the British group.
Vodafone declined to comment.
Expectations of consolidation also boosted other big telecom
stocks, with Telecom Italia up 1.9 percent and France
Telecom up 1.3 percent.
At 1125 GMT, the FTSEurofirst 300 index of top
European shares was up 1.1 percent, or 12.52 points, at
1,201.44, with Vodafone representing 1.15 points of the index's
The FTSEurofirst 300 has now retraced more than two thirds
of a pull-back started in mid-March, when Cyprus's bailout plan
sparked fears of a bank run in the euro zone's most indebted
The euro zone's blue chip Euro STOXX 50 index
was up 1.2 percent on Tuesday at 2,656.80 points, piercing the
2,650 points level that had been seen as a key resistance level
"It's a technical move. We're re-testing previous highs on
European indices and then there's just a little bit of a short
squeeze going on," said Matt Basi, head of UK sales trading at
CMC Markets UK.
"We've actually seen clients selling into the move so our
clients certainly aren't the believers in this morning's rally.
It's taking place in fairly light volume in the underlying
Most mining stocks bucked the trend on Tuesday, as metal
prices such as copper and aluminium dropped, hurt by worries
about demand following downbeat manufacturing data from the
United States, China and Europe.
ArcelorMittal was down 3.2 percent, Norsk Hydro
down 2.6 percent and Kazakhmys down 3.6
Factory data for March released on Monday signalled a weaker
than forecast expansion in the United States while Chinese
manufacturing activity failed to show a strong revival in its
pace of growth.
In Europe, Markit's Eurozone Manufacturing Purchasing
Managers' Index fell in March to 46.8 from 47.9 in February,
although the figure was slightly better than a preliminary
estimate of 46.6.
"We're realising that China's economic situation is more
complicated then ... people had expected, and investors are
starting to doubt that the country will be able to grow its
economy by 7-8 percent this year," a Paris-based trader said.
Around Europe, UK's FTSE 100 index was up 1.1
percent, Germany's DAX index up 1.2 percent, and
France's CAC 40 up 1.1 percent, while Spain's IBEX
was up 0.7 percent and Italy's FTSE MIB 0.7
European stocks have sharply rallied since mid-2012 - with
the Euro STOXX 50 gaining about 30 percent - lifted
by the European Central Bank's pledge to safeguard the euro,
which eased fears of a break-up of the region's currency bloc.
The rally stalled recently, however, halted by the return of
worries about political risks in the euro zone, such as the
political impasse in Italy following an inconclusive election
and Cyprus's mounting debt crisis, which have prompted investors
to book some gains and move to the sidelines.
(Additional reporting by Francesco Canepa in London and
Alexandre Boksenbaum-Granier in Paris/editing by Chris Pizzey,
London MPG Desk, +44 (0)207 542-4441)