European shares rise as Italian govt crisis threat recedes


* FTSEurofirst 300 up 0.5 pct, Euro STOXX 50 up 1 pct

* Euro zone PMIs, easing tensions in Rome help shares

* Fidelity says Fed policy to offset U.S. shutdown damage

By Francesco Canepa

LONDON, Oct 1 (Reuters) - European shares rebounded onTuesday as positive euro zone data and rising expectations thata government crisis in Italy will be allayed boosted euro zonebanks and peripheral indices.

Gains were capped, however, by uncertainty over the impactof the partial U.S. government shutdown, which potentially putup to 1 million workers on unpaid leave.

At 1449 GMT, the euro zone's blue-chip Euro STOXX 50 index was up 1 percent at 2,922.12 points. Thepan-European FTSEurofirst 300 index was up 0.5 percentat 1,253.11 points, steadying after it shed about 1.8 percentfrom a five-year high hit two weeks ago.

Italy's FTSE MIB rose 2.4 percent, recouping partof a 4 percent drop in the previous three sessions, as aprominent "dove" in Silvio Berlusconi's party said a majority ofparliamentarians in the party want to back the government in aconfidence vote on Wednesday.

Italy's Intesa Sanpaolo, a major holder of Italiansovereign debt, rallied 5.6 percent, leading a 2.4 percent rallyin the STOXX 600 Euro zone banking index as bonds fromsouthern European countries rebounded. Spain's Ibex added 1.5 percent.

Stocks were also boosted by data showing factory activity inthe euro zone grew for the third month running in September andstronger demand enabled manufacturers to raise prices for thefirst time since mid-2012.

"At the moment the euro crisis is in remission because we'vegot some strong economic numbers," said Trevor Greetham,director of asset allocation at Fidelity Worldwide Investment,which manages assets worth 160.1 billion pounds ($259.27billion).

"Even this Rome crisis is unlikely to cause major problemsbut somewhere out there the next time there's an economicslowdown we think Europe will see a very rapid increase instress once more."

European stocks rose 2-1/2 times faster than their U.S.counterparts in the three months to the end of September,Datastream data showed, but Greetham expected this trend toreverse as further debt-cutting by euro zone governments andbanks once again took its toll on growth.

By contrast, Greetham said the U.S. economy looked on aself-sustained recovery and a loose monetary policy by theFederal Reserve for longer was likely to make up for any damagefrom the government shutdown.

Philippe Gijsels, head of research at BNP Paribas FortisGlobal Markets in Brussels, said uncertainty about the U.S.fiscal and debt position could cause fresh upsets in comingweeks but the picture remained positive.

"Longer term, the fundamentals for higher equity pricesremain in place as the world economy is picking up and quite alot of money sits by the sidelines ready to come in," Gijselssaid.

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