* FTSEurofirst 300 gains 0.2 pct, hits 3-week high
* Euro zone's Euro STOXX 50 index sets 5-1/2-year peak
* Novartis rises on positive results for heart drug
* Miners top sectoral gainers, Italian banks rally
By Atul Prakash
LONDON, March 31 European equities hit a
three-week high on Monday, with Novartis stronger due to good
results for its heart drug and miners performing well on
expectations that China might stimulate its economy.
Swiss drugmaker Novartis, up 3.6 percent, added
the post points to the FTSEurofirst 300 index after
saying it has ended a late-stage clinical trial of a chronic
heart failure drug early, following strong interim results.
Among big sectoral movers, the STOXX Europe 600 Basic
Resources index rose 0.5 percent on speculation of new
stimulus measures in China, the world's biggest metals consumer,
with Chinese Premier Li Keqiang saying that Beijing was ready to
support the cooling economy.
At 1125 GMT, the pan-European stock index was up 0.2 percent
at 1,334.45 points after touching 1,340.73, the highest since
early March. The euro zone's blue-chip Euro STOXX 50
was flat after hitting a 5-1/2-year high of 3,185.67.
However, investors stayed cautious in trading stocks on the
last day of the quarter and ahead of events later this week that
could set the market's near-term direction. Focus will be on the
European Central Bank's policy meeting on Thursday and U.S. jobs
data on Friday.
"It is the last trading day of the quarter and the market
appears to be treading water ahead of the ECB's policy meeting
and the market sensitive economic numbers from the United
States, such as ISM and non-farm payrolls," Robert Parkes,
equity strategist, HSBC Securities, said.
Expectations that the ECB will take radical action to stop
the threat of deflation in the currency bloc rose after data
showed euro zone inflation hit its lowest level since November
2009 in March.
ITALIAN BANKS GAIN
Among other sharp movers, Italian banks led financial stocks
higher on news that they will not require any state funds.
Shares in Monte dei Paschi di Siena, Intesa Sanpaolo
and UniCredit rose 1.4 to 8.8 percent.
Banco Popolare spiked 7.8 percent on the first day
of a 1.5 billion euro ($2.06 billion) capital increase which
according to the Italian press has attracted interest from
Italy's FTSE MIB, up 0.6 percent, rose more than
other major indexes, with Credit Suisse strategists seeing
further gains saying the country's potential reforms should
boost economic recovery while credit conditions are easing.
Italian stocks, which have strongly outperformed broad
European stock indexes as well as U.S. markets so far this year,
are still the cheapest stocks in Europe in terms of book value,
according to data from Thomson Reuters Datastream.
Italian shares trade at 1.02 times book value, while Swiss
stocks trade at 2.75 times book value, and overall European
stocks trade at 1.85 book value.
Analysts said the broader market's outlook remained positive
and key indexes, such as the Euro STOXX 50, could set new highs
in the medium term, but caution is required in the short-run.
The blue-chip index's 5-1/2-year high on Monday is about 7
percent higher since a low hit in mid-March.
"The index's outlook is positive for the time being. Ideally
we want to see a close above January highs. I will be a little
bit cautious on its sustainability and would like to see if the
recent rally is because of the month-end flows," Lynnden
Branigan, technical analyst at Barclays Capital, said.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
(Additional reporting by Blaise Robinson in Paris; Editing by