* Italy's FTSE MIB outperforms as Renzi wins EU vote
* Pro-EU forces keep majority after European election
* French CAC lags, Germany's DAX hits record high
* London, New York closed for public holiday
By Atul Prakash
LONDON, May 26 European equities advanced in thin trading on Monday, with Italian shares outperforming the regional market after voters endorsed Prime Minister Matteo Renzi's centre-left Democratic Party's reforms in European elections.
Results from around the 28-nation bloc showed pro-European centre-left and centre-right parties will keep control of around 70 percent of the 751-seat EU legislature, but the number of Eurosceptic members will more than double.
"People were afraid that Eurosceptic parties would emerge as big winners. In some countries they are big winners, but the outcome is not as bad as feared," Koen De Leus, senior economist at KBC, in Brussels, said. "For example, election results from Italy suggest that Renzi would be able to continue his reforms."
Italy's FTSE MIB rose 3 percent, outpacing other major European indexes, boosted by gains in domestically focused banks including UBI Banca and BP Milano, up 5.5 percent and 6 percent respectively.
In Germany, Chancellor Angela Merkel's conservatives won the most votes in the elections, helping the benchmark DAX index to climb to a new record high of 9,876.10 points. The index was up 1.1 percent at 9,869.43 by 1307 GMT, while the euro zone's blue-chip Euro STOXX 50 gained 0.9 percent.
However, in France, the anti-immigrant and anti-euro National Front party topped the vote, in what French Prime Minister Manuel Valls described as a political "earthquake." France's CAC-40 was up 0.5 percent, lagging the overall market.
Francois Savary, chief investment officer at Swiss bank Reyl, said that while the French EU vote result showed the country's political difficulties, it should not affect the stock market too much, since many CAC companies make much of their money outside France.
"The EU vote says a lot about the difficulties that France is in. But we still have some great stocks and great export companies on the CAC-40," he said.
Michel Juvet, chief investment officer at Swiss bank Bordier, said that while the rise of Eurosceptic parties could be unsettling for some, it could also put even more pressure on the European Central Bank to unveil measures next month to support the region's economic recovery.
Expectations of new ECB action in June, including interest rate cuts, have helped prop up European stock markets.
ECB President Mario Draghi said on Monday the central Bank must be "particularly watchful" for any negative price spiral taking hold in the euro zone, adding the bank was not resigned to inflation being too low for too long.
Trading volumes were low as the London and New York markets were closed for a public holiday. Volumes on the Euro STOXX 50 index were 47 percent of its 90-day daily average in late afternoon trading.
Among individual sharp movers, Bull surged 21.7 percent on news Atos will buy the company in an all-French IT sector deal worth 620 million euros ($845 million). The deal will create the top Europe-based cloud computing company. Atos shares were up 5.4 percent.
Of the fallers, Getinge lost 9.4 percent after the Swedish medical technology firm postponed a planned update to investors as a result of discussions with the U.S. Food & Drug Administration (FDA) related to quality issues at its Medical Systems unit.
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 Sudip Kar-Gupta and Francesco Canepa; editing by Keiron Henderson and Susan Thomas)
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