M&A activity lifts European shares above 1,000 mark

                                
 * FTSEurorfirst 300 rises, boosted by M&A deals
                                
 * Banks, utilties and drugmakers among top gainers
                                
 * German shares rise after elections
                                
 * For up-to-the-minute market news, click on [STXNEWS/EU]
                                
 By Dominic Lau
                                
 LONDON, Sept 28 (Reuters) - European shares rose sharply on
Monday, with the main FTSEurofirst 300 <.FTEU3> index regaining
the 1,000 mark, as a pick up in merger and acquisition activity
buoyed investor sentiment.
                                
 U.S. Xerox Corp <XRX.N> announced its plan to buy Affiliated
Computer Services Inc <ACS.N> in a $6.4 billion cash-and-stock
deal. [ID:nN2863430]
                                
 Abbott Laboratories <ABT.N> also said it would buy the drugs
unit of Belgium's Solvay <SOLB.BR> in a $6.6 billion deal, while
Johnson & Johnson <JNJ.N> bought an 18 percent stake in Dutch
biotech firm Crucell <CRCL.AS> for $444 million.
                                
 The FTSEurofirst 300 <.FTEU3> of top European shares closed
1.8 percent higher at 1,001.42 points, snapping a two-day losing
streak which pushed the index below the 1,000 level.
                                
 "It's a sign that it's getting back to normal and companies
are trying to be quick off the mark," said Mark Bon, fund
manager at Canada Life in London.
                                
 "If you have access to financing at the moment, then the
cost of acquisition is quite low because you can buy into a
company on low valuations," he said.
                                
 Heavyweight banks <.SX7P> were among the top gainers in
Europe, with Commerzbank <CBKG.DE>, Barclays <BARC.L>, HSBC
<HSBA.L>, Societe Generale <SOGN.PA> and Standard Chartered
<STAN.L> up 1.7-4.7 percent. The sector has rallied 171 percent
since early March.
                                
 However, Norway's biggest banking group DnB NOR <DNBNOR.OL>
lost 2.7 percent, in part due to the country's lifting a ban on
short-selling banking and insurance shares and partly in
reaction a sharp rise on Friday, a trader said.
                                
 Germany's stock market was Europe's strongest performer,
with the DAX <.GDAXI> up 2.8 percent after Sunday's election
delivered a result that analysts said was helpful to business.
                                
 Chancellor Angela Merkel's conservatives vowed to seal a
coalition deal, including tax cuts, with the pro-business Free
Democrats within a month after winning the election.
                                
 
                                
 POWER UP
                                
 Shares in nuclear plant operators E.ON <EONGn.DE> and RWE
<RWEG.DE> rose 4.5 and 4.2 percent respectively, driven by
investor hopes the German government will reverse a law to close
atomic power stations by 2020.
                                
 Solar power stocks fell on fears of lower subsidies, with
Q-Cells <QCEG.DE> down 1.2 percent.
                                
 Among pharmaceutical shares, AstraZeneca <AZN.L> advanced
2.8 percent, with traders citing market talk Swiss rival
Novartis <NOVN.VX> could be considering a takeover offer. Both
AstraZeneca and Novartis, whose shares added 0.9 percent,
declined to comment.
                                
 Crucell shares sank 3.9 percent as the sale of a stake in
the firm to Johnson & Johnson sparked worries that a prospective
takeover of the company would not happen, while Solvay shares
ticked down 0.1 percent.
                                
 Volumes at the FTSEurofirst 300 were at 96 percent of the
90-day average volume.
                                
 The pan-European index is up 20.4 percent from its lifetime
low of March 9, and is on track to post its best quarterly rise
in almost a decade, as investors have become more confident
about the prospects of economic recovery.
                                
 Across Europe, Britain's FTSE 100 <.FTSE> added 1.6 percent
on Monday and France's CAC 40 <.FCHI> put on 2.3 percent.
                                
 British building supplies company Wolseley <WOS.L> soared
more than 11 percent after reporting a full-year profit that
beat analysts' expectations. [ID:nLS172820]
                                
 Oil producers were also firmer, with BP <BP.L> up 1.9
percent and Royal Dutch Shell <RDSa.L> rising 2 percent.
                                
 A raft of M&A deals also helped shares shrug off weaker data
in the United States. A report from the Federal Reserve Bank of
Chicago showed economic activity slipped in August, hurt by
ongoing weakness in the labour market even as production
indicators improved. [ID:nNYS005442]
                                
 Morgan Stanley said in a report that equities appeared to be
set for a consolidation in the next few weeks but added that an
overbought market "has no bearing on the 6-12 month outlook."
                                
 "We don't see this (short-term consolidation) as a major
turning point so we keep on playing cyclicals/commodities
through materials and oil, financials through insurance," Ronan
Carr, Morgan Stanley's European equity strategist, said.
                                
 (Additional reporting by Brian Gorman and Atul Prakash)