* FTSEurofirst 300 up 0.7 pct, sets 6-year high
* Euro STOXX 50 up 0.8 pct
* Italy leads rally as strong results fuel recovery hopes
* Sky Deutschland, Alstom boosted by M&A activity
By Francesco Canepa
LONDON, May 12 European shares scaled six-year
highs on Monday, led by Italian companies after strong results
from the country's biggest bank, UniCredit, among other firms.
Sentiment was further underpinned by fresh mergers &
acquisition activity and renewed speculation about monetary
stimulus from the European Central Bank following dovish
comments from Austria's central banker, Ewald Nowotny.
Italy's FTSE MIB index rose 1.5 percent to outpace
all major European indexes as estimate-beating results from
lenders UniCredit, Banca Popolare di Milano
and also from motorway and airport operator Atlantia
reinforced optimism about a recovery in the euro zone's third
Italian shares, along with their peers in Spain, Portugal
and Greece, have outperformed indexes in core European countries
such as Germany and France over the past year, boosted by
improving economic data.
"Usually you'd expect corporate profits to come through
roughly six months after the economic data so that's not
surprising for us," said Matthias Thiel, market strategist at
Hamburg-based M.M. Warburg, which manages assets worth 50
million euros and is bullish on southern European assets.
"The recovery story is playing out as expected," he said.
UniCredit returned to profit in the first quarter of 2014 as
bad loans fell for the first time since 2008, while Atlantia's
quarterly results showed a rebound in traffic at the highway and
Both stocks were among top risers on the pan-European
FTSEurofirst 300's index, which was up 0.7 percent at
1,364.32 at 1344 GMT, having hit a high not seen since May 2008
at 1,364.75 points earlier in the session.
The euro zone's blue-chip Euro STOXX 50 index
was up 0.8 percent at 3,210.58 points
Comments from the ECB's Nowotny also underpinned markets.
The Austrian said a rate cut alone would probably not be
enough to combat low inflation in the euro zone and that he
would favour a "package" of measures, which traders speculated
might include an asset-buying programme.
Miners were the best-performing sector across
Europe, rising 2.6 percent after JPMorgan upgraded them to
"overweight" from "underweight", saying it was shifting funds
into the neglected mining sector from autos, which have seen
strong share price gains.
In the last 12 months, miners have risen about 5 percent,
contrasting with a near 40 percent gain for autos.
A burst of dealmaking and the possibility of more stimulus
steps from the ECB in June have bolstered European equities in
On Monday, France's Alstom rallied after Germany
said it would support a takeover by Siemens.
Alstom - which is reviewing a bid by U.S. giant General
Electric for its energy businesses - climbed 2.9 percent
after German Chancellor Angela Merkel said on Saturday her
government would support a tie-up between Siemens and Alstom if
the companies decided it would make sense.
Further fuelling M&A activity, Britain's largest pay-TV
company BSkyB said it was in talks to buy Sky
Deutschland and Sky Italia, a 10 billion euro deal
that would realise Rupert Murdoch's long-held ambition to
combine his European TV interests in a single business.
Shares in Sky Deutschland rose nearly 10 percent while BSkyB
fell 2.1 percent.
Despite the rebound in corporate dealmaking, lofty
valuations mean some analysts are taking a bearish short-term
view on markets.
The STOXX Europe 600 trades on a 12-month forward
price/earnings ratio of about 14 times, against its 10-year
average of around 12 times, Thomson Reuters Datastream shows.
"I think on a one- to two-month view, I'd be reasonably
cautious now. The M&A might continue to bail us out a bit, but I
think on the other fundamentals it's looking a little bit
toppy," Peel Hunt equity strategist Ian Williams 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 Tricia Wright and Blaise Robinson;
Editing by Gareth Jones)