* FTSEurofirst 300 up 0.2 pct, Euro STOXX 50 up 0.5 pct
* FTSEurofirst 300 hits 4-1/2 year high
* Euro STOXX 50 still needs to double to hit record high
* Vodafone surges on Verizon tie-up talk
By Blaise Robinson
PARIS, March 6 (Reuters) - European shares hit their highest since the 2008 collapse of U.S. bank Lehman Brothers on Wednesday, building on their biggest jump so far this year on hopes of a broader global economic recovery.
The market’s rally was also fuelled by merger and acquisition hopes, with UK telecom major Vodafone Group surging 6.5 percent on reports of tie-up talks with U.S. peer Verizon Communications.
At 1200 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,191.50 points, after vaulting over its 2011 intraday peak and hitting a 4-1/2 year high of 1,193.35 points.
The index’s multi-year high mirrored a similar move by the Dow Jones industrial average on Tuesday, with Wall Street’s blue-chip index hitting its highest level ever.
The euro zone’s Euro STOXX 50 index was up 0.5 percent at 2,695.11 points. The blue-chip index has surged about 30 percent since last May, but still needs to double to reach its record high hit in 2000.
“At these levels we might get a little correction, so we’re ‘neutral’ right now. But the longer-term outlook is definitely positive, with good chances of a catch-up rally for European shares after years of underperformance,” Mandarine Gestion fund manager Yohann Salleron said.
“Within Europe, we could easily see a sector rotation, out of luxury and other companies focused on emerging markets, and into financials, telecoms and utilities which are quite cheap,” the fund manager said.
The recent rally in European shares has brought valuation ratios to levels not seen in nearly three years. The broad STOXX Europe 600 index trades at 12.1 times 12-month forward earnings, just below a 10-year average P/E ratio of 12.2.
This compares with a P/E ratio of 13.3 for Wall Street’s S&P 500.
“Indexes are breaking above big resistance levels and this is creating room on the upside,” said Lionel Jardin, head of institutional sales at Assya Capital, in Paris.
“The sentiment is that central banks are going to remain very accommodative for a while... In this environment, we’re seeing more and more people switching from money markets and government bonds and into equities.”
Tuesday’s roughly two percent gain for most European markets was the biggest since the first day of 2013 and was based largely on hopeful signs on the U.S. economy and expectations of strong pledges to support growth from central banks this week.
Janet Yellen, the U.S. Federal Reserve’s influential vice chairwoman, fuelled the rally this week by saying the Fed’s aggressive monetary stimulus was warranted.
The European Central Bank and the Bank of England both meet on Thursday, and many analysts expect at least a hint from the former that it is moving towards another cut in interest rates.
Around Europe on Wednesday, UK’s FTSE 100 index was up 0.4 percent, Germany’s DAX index up 1.1 percent, and France’s CAC 40 up 0.3 percent.
The STOXX telecom sector index, among the biggest laggards so far this year, was up 2.1 percent, boosted by consolidation hopes following the Vodafone-Verizon tie-up reports.
Telekom Austria was up 0.8 percent and Telecom Italia up 1.1 percent.
Insurance companies also featured among the top gainers, with AXA up 1 percent, Aegon up 1.8 percent and Allianz up 1.5 percent.
Despite this week’s strong gains in stocks, TradingSat technical analyst Alexandre Tixier said it’s probably better to wait for a pull-back.
“With the ECB, BoE and the U.S. payrolls this week, I don’t think it’s a good idea to buy following such a rally,” he said.
“The medium trend is positive, but multi-year highs are never good entry levels. We’re going wait for a pull-back before getting in. It might take a few days before we get that, but it’s worth staying on the sidelines meanwhile.”