* FTSEurofirst 300 up 1.1 pct at 1,221.36
* PMIs boost shares, could help lift earnings outlook
* Ahold climbs after Q2 profit beat
* Wolseley jumps on UBS upgrade ahead of results
By David Brett
LONDON, Aug 22 (Reuters) - European stocks received a boost on Thursday as economic data from the euro zone indicated a recovery was taking hold, potentially providing an uplift to earnings into the year-end.
By 1422 GMT, European shares were enjoying their best session since early July, rebounding 13.65 points, or 1.1 percent to 1,221.36, following falls over the last three days.
The Stoxx 600 also rose 1.1 percent, to 304.04, and all sectors were in positive territory after data showed business activity across the euro zone picked up more quickly than expected in August.
"The burning question now is how long is the lag between improving macro fundamentals and an EPS upgrade cycle?" Robert Quinn, chief European equity strategist at S&P Capital IQ, said.
"Typically it is four months and accelerates when PMIs cross 52 (August was 51.7), and hence we stick to our previous timeline that the Q3 reporting season will see significant upgrades," he said.
S&P has targets of 325 for the Stoxx 600 for the end of 2013, up 7 percent from current levels, and 375 for end-2014. It said the two-year earnings downgrade cycle is over and it assumes 7 percent and 10 percent EPS growth for 2013-14.
China also released better data, pointing to stabilising growth and helping lift London-listed mining shares by 1.9 percent as Chinese manufacturing activity hit a four-month high in August, according to a flash PMI.
"If you want to understand whether there's a positive or a negative outlook for equities, then PMIs are quite a good measure. We've seen a gradual improvement in PMIs since last July, and now we're in growth territory," James Butterfill, global equity strategist at Coutts, said.
Earnings from European companies appear to be improving.
Shares of Dutch retailer Ahold jumped 5 percent after the company reported higher-than-expected operating profit for the second quarter.
Just 46 percent of companies have so far missed earnings expectations in the second quarter compared with 48 percent in the previous quarter, according to Thomson Reuters StarMine.
Builders' merchant Wolseley was another strong gainer, rising 4.1 percent after UBS upgraded its recommendation on the company, which has a strong U.S. presence, to "buy" from "neutral" ahead of results due on Oct. 1.
"Analysis of U.S. peers that have reported on Q2 suggests Wolseley's growth should have accelerated to double-digit growth in (the quarter) to July," UBS analysts said in a note.
The FTSEurofirst 300, however, remains 3.1 percent off a five-year high hit in May, and volatility - a crude gauge of investor fear - could climb higher heading into September after the U.S. Federal Reserve's minutes on Wednesday offered little clarity over the timetable for a slowdown of its stimulus programme.
"If the Fed has given us nothing from these minutes, then we've got to assume that at the next meeting they're going to be a bit more candid about the plan, so there are a couple of weeks to prepare yourself and not make any rash decisions," Will Hedden, sales trader at IG, said.