European shares edge higher on recovery optimism

                                
 * FTSEurofirst 300 <.FTEU3> up 0.3 percent
                                
 * Smith & Nephew up on takeover report
                                
 * For up-to-the-minute market news, click on [STXNEWS/EU]
                                
 
                                
 By Brian Gorman
                                
 LONDON, Dec 8 (Reuters) - European shares edged up on
Wednesday, near a two-year high, as prospects for further
economic recovery outweighed worries about sovereign debt levels
in the euro zone.
                                
 At 1002 GMT, the FTSE Eurofirst 300 <.FTEU3> index of top
European shares was up 0.3 percent at 1,119.41 points, having
moved in and out of positive territory. It had risen 0.9 percent
in the previous session, when it hit its highest intraday level
since September 2008.
                                
 U.S. tax cuts and the prospect of further monetary stimulus,
have boosted optimism about economic recovery, though investors
remain worried about the euro zone's debt troubles.
                                
"The euro zone debt crisis hasn't gone away. Spain remains
the thing to watch," said Bernard McAlinden, investment
strategist at NCB Stockbrokers in Dublin.
                                
 "But it will not be enough to stop a rally in global equity
markets. The data, especially PMIs, has been reasonably good,
with good figures out of Germany, though the U.S. labour market
data has been disappointing."
                                
 Bid speculation helped Smith & Nephew <SN.L> rise 4.5
percent. The Daily Mail newspaper's market report noted talk of
a 7.1 billion pound, or 8 pounds-a-share cash offer from a U.S.
consortium of private equity players for the maker of
replacement knees and hips. Smith & Nephew was not immediately
available for comment. 
                                
 Heavyweight banks to edge up included Credit Suisse
<CSGN.VX> and Societe Generale <SOGN.PA>, 0.9 and 1.3 percent
higher respectively.
                                
  A stronger dollar helped to weaken metals prices, but
mining shares were little changed, paring earlier losses.
 The dollar extended gains on Wednesday on a spike in U.S.
Treasury yields as a proposed extension of tax cuts raised
growth expectations for the U.S. economy. 
                                
  Across Europe, Britain's FTSE 100 <.FTSE> was flat;
Germany's DAX <.GDAXI> was down 0.1 percent and France's CAC40
<.FCHI> rose 0.2 percent.  
                                
 The Thomson Reuters Peripheral Eurozone Countries Index
<.TRXFLDPIPU> was up 0.1 percent. 

                                
 PRUDENTIAL RISES 
                                
 British insurer Prudential <PRU.L> rose 2.4 percent after
UBS upped its price target. Other insurers to rise included
Allianz <ALVG.DE>, AXA <AXAF.PA> and Zurich Financial <ZURN.VX>,
up between 1.6 and 2 percent.
                                
 European aerospace group EADS <EAD.PA> rose 2.7 percent
after Chief Financial Officer Hans Peter Ring said in a
newspaper interview that he expected profit to improve
significantly in 2012. [ID:nLDE6B70GB]
                                
 On the macro front, German exports fell unexpectedly in
October while imports rose to a record high, narrowing the trade
surplus in a sign that domestic growth is gaining pace, official
data released on Wednesday showed. [ID:nLDE6B61S1]
                                
Political tensions remained a factor for investors, after
North Korea fired artillery shells in a suspected military drill
on Wednesday. [ID:nN08113240]