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European shares hit
a two-month high in holiday-thinned trade on Monday on optimism the
earnings season will stay strong in the near-term and in a knee-jerk
reaction to news that al Qaeda leader Osama bin Laden was killed.

Mr Bin Laden’s
death in a shoot-out with U.S. forces in Pakistan on Sunday ended a
nearly 10-year worldwide hunt for the mastermind of the September 11
attacks and prompted equity investors to believe global risk threats
might reduce.

Although analysts
said that the positive impact of the news might be short-lived and
focus will soon shift back to economic fundamentals and company
earnings.

At 0735 GMT, the
FTSEurofirst 300 index of top European shares was up 0.3 percent at
1,160.03 points after touching 1,162.05, the highest since early March.
The Euro STOXX 50 — an index of the euro zone’s top blue chips — was
up 0.3 percent at 3,021.50 points.

The UK stock market was closed for a holiday.

“It’s a
psychological and knee-jerk reaction and we have to see how long it
lasts,” said Koen De Leus, strategist at KBC Securities, referring to
the news of Mr bin Laden’s death.

“The market is also
getting support from earnings, which are good. We have some important
economic figures this week that might set the near-term direction.”
Investors awaited the release of the U.S. Institute for Supply
Management’s manufacturing index at 1400 GMT, U.S. jobless claims
figures on Thursday and non-farm payrolls numbers on Friday.

Across Europe,
France’s CAC 40 gained 0.5 percent, while Germany’s DAX rose 0.9
percent to its highest level in more than three years.

“Last week and this
week taken together, more than two thirds of the DAX companies will
report. In these two weeks, the chances for a test of the equity
market’s leeway on the upside will be better than in the weeks to
come,” said Tammo Greetfeld, equity strategist at UniCredit in Munich.

“Going forward, the
newsflow is unlikely to live to high expectations given a number of
burdening factors that have accumulated,” he said, referring to factors
such as a rise in oil prices, more and more central banks raising
interest rates, cyclical indicators which are past their peak, the
catastrophe in Japan and the euro zone debt crisis.

Among individual
movers, Demag Cranes surged 22 percent after U.S. crane maker Terex
said it would launch a takeover offer for its German rival in an 884
million euro bid.

Danish food
ingredients and enzymes maker Danisco gained 4.3 percent after its
board of directors unanimously recommended that Danisco shareholders
accept DuPont’s improved offer for Danisco.

On the downside,
Actelion fell 5 percent after the company said it may appeal against a
jury’s decision in a Californian court to award Asahi Kasei Pharma
Corporation up to $547 million in a dispute with Actelion unit CoTherix.

TNT was down 3.8
percent after reporting a worse than expected performance in its mail
unit, adding to woes in its global express division.