Oil and Gas

China PMI give Europe shares commodities-led lift

* FTSEurofirst 300 index rises 2.1 pct

* China PMI data lifts economic recovery hopes

* Oil & gas, banks, mining top sectoral gainers

FRANKFURT, June 1 (Reuters) - European shares rose almost across the board on Monday as data showing China’s manufacturing sector continued to expand in May boosted Asian stocks, adding to the positive sentiment seen in Wall Street’s higher close on Friday.

At 0818 GMT the FTSEurofirst 300 .FTEU3 index of top European shares was up 2.1 percent at 879.81 points, having hit 880.55 points -- its highest level since Jan. 9.

“The trigger for the rally is the Chinese PMI. There are close (economic) ties between China and Europe, and Europe benefits from better economic data there,” said Heino Ruland, analyst at Ruland Research.

China’s official purchasing managers’ index (PMI) in May recorded its third straight month above the mark of 50 that separates expansion from contraction, fuelling optimism that the worst of the global downturn may be over. [ID:nSP428779]

“Three consecutive months of readings above 50 really shows that Chinese stimulatory policy is gaining traction. It looks like an economic recovery is well underway in China, possibly leading to a sustained rally and re-rating of commodity prices and associated stocks,” IG Markets said in a note.

Basic resources, which includes mining and steel companies seen by analysts as among beneficiaries of economic growth in China, was the main gainer, with the DJ Stoxx sector index .SXPP up 6.2 percent at its highest level since mid-October.

Steelmaker ArcelorMittal ISPA.AS rose 6.8 percent and among miners Rio Tinto RIO.L was up 5.8 percent, Anglo American AAL.L up 6.1 percent and BHP Billiton BLT.L put on 4.3 percent. London copper futures MCU3 rose to a seven-month high. [ID:nSP429585]

A 2-percent rise in the price of crude oil CLc1, also to a seven-month high [ID:nSP429646], underpinned energy shares, with Total TOTF.PA up 2.2 percent, Royal Dutch Shell RDSa.L 1.7 percent higher and StatoilHydro STL.OL gaining 2.4 percent.

In euro zone data, manufacturing PMI rose to a seventh-month high of 40.7, up from 36.8 in April and just above the flash reading and economists’ expectations for it to hit 40.5.


European auto shares also rose, with the DJ Stoxx European sector index .SXAP up 4.3 percent, after U.S. government officials said carmaker General Motors Corp GM.N would file for bankruptcy later on Monday. [ID:nN01398575] [ID:nCARS1]

Peugeot PEUP.PA rose 6.9 percent, Renault RENA.PA added 5.4 percent, Daimler DAIGn.DE was up 5.8 percent and BMW BMWG.DE gained 3.8 percent -- all outperforming Fiat FIA.MI, up 0.8 percent, after the Italian carmaker failed to find favour for its bid for GM's European units.

Banks .SX7P added the most points to the European top-300 index, with Societe Generale SOGN.PA up 3.5 percent, Commerzbank CBKG.DE 3.0 percent higher, Banco Santander SAN.MC rising 2.7 percent and Royal Bank of Scotland RBS.L adding 4.5 percent.

Across Europe, with trading volumes reduced by public holidays in some countries, Britain's FTSE 100 index .FTSE was up 1.7 percent, Germany's DAX .GDAXI gained 3.1 percent and the French CAC 40 .FCHI added 2.3 percent.

Europe’s benchmark index rose 0.7 percent last week. In May, it rose 4 percent, a third straight monthly gain and its best winning streak in two years. S&P Equity Research said the rally looked unlikely to last.

“All risky assets have repriced simultaneously, from industrial metals and commodities to equities and crossover-grade bonds, in this recovery rally. This is quite clearly irrational and unsustainable,” S&P said in a note.

Later in the day investors will focus on the U.S. Institute for Supply Management’s (ISM) national factory report for May.

The ISM is forecast to rise to 42.2 from 40.1 in April, according to 68 economists polled by Reuters. G7TODAY

ING said ISM was probably the best lead indicator for U.S. GDP. “There is a real chance that today’s ISM report will produce a figure consistent with positive growth. However, there are doubts as to how durable this story will be,” ING said. (Editing by Greg Mahlich)