* FTSEurofirst 300 up 0.7 pct
* Fed less hawkish than expected - analysts
* Rolls Royce top riser after buyback
By Alistair Smout
EDINBURGH, June 19 European shares rose in early
deals on Thursday, boosted after the Federal Reserve said the
U.S. economy was making progress and committed to retaining
accommodative monetary policy over the long term.
The pan-European FTSEurofirst 300 rose 0.7 percent
by 0741 GMT, tracking gains overnight on Wall Street and in Asia
that saw the S&P 500 hit a new record high.
The Euro STOXX Volatility index, which measures how
much investors have to pay to protect gains through options and
is a crude indicator of investor fear, fell to its lowest since
The gains were made after the Fed hinted at a slightly
faster pace of interest-rate increases starting next year but
suggested rates in the long run would be lower than it had
Expectations had been building that the Fed would take a
more hawkish view in order to tackle inflation that was higher
"Expectations going into this were probably overextended to
a certain extent. There was a fear that the Fed would pick up
more of a hawkish rhetoric, which they didn't do," Ioan Smith,
director at KCG, said.
"It was probably patience on their part, even after the
uptick in inflation in May."
The rise left the FTSEurofirst 300 just 0.1 percent off of
its 2014 high set earlier this month, which was the index's
highest level since January 2008.
The index has been rangebound in recent weeks as violence in
Iraq has pushed up the price of oil, lifting shares of major oil
companies but raising input costs for other companies, as well
as squeezing consumer spending.
Brent crude held near a nine-month high above $114 a barrel
on Thursday, poised for a third day of gains following a rise of
more than 4 percent last week on supply concerns after Islamic
militants seized much of northern Iraq.
Top blue-chip gainer in Europe was Rolls Royce, with
the engine maker up 6.1 percent after it announced a one billion
pound ($1.69 billion) share buyback.
Strategists at Citi recommended targeting companies that
have done buybacks, finding that they usually perform well on
the stock market. The bank's basket of these stocks has returned
14 percent per annum since the year 2000.
"Given the cheap debt financing and large cash piles on
company balance sheets, we think companies will continue to
return capital to shareholders via buybacks," strategists at
Citi said in a note. "We find companies doing buybacks have
tended to be strong performers."
The bank highlights oil major Royal Dutch Shell,
plane maker Airbus and Swiss pharamcuetical Actelion
as their top picks in Europe.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
(Editing by Toby Chopra)