European markets surge higher

LONDON, July 29 (Reuters) -- Insurers led European shares sharply higher by midday on Monday as calm descended on bourses after last week's wild ride, but a welter of earnings reports and key U.S. economic data loomed later in the week.

Rallying U.S. stock index futures and a revived dollar bolstered hopes that Wall Street would extend Friday's gains, while weaker crude oil failed to hit heavyweight oils.

Insurers dominated the blue chip advancers as the sector, bombed out on worries over its solvency in the face of sliding stocks, rode the market bounce, with Germany's Allianz up 8.5 percent, while Dutch duo ING and Aegon gained 7.5 percent.

Swiss Life jumped 13.6 percent on rumours the insurer could be a takeover target.

The FTSE Eurotop 300 index was up 3.3 percentat 935.7 points, distancing itself from last week's five year lows as advancing issues outpaced decliners by nine-to-one.

"It feels a bit better and there is more value at these levels,'' said John Hatherly, head of global analysis at M&G, a fund.

"I think it's a technical rally that could go further, but it's a busy week for results and I would not write off some bad news blowing it lower.''

The Euro Stoxx 50 index gained 3.7 percent to 2,630 points.

Chartists said the Euro Stoxx 50 needed to break above 2,906 to enter a positive trend.

"It looks good for the moment, but not good enough to call a bottom, or call this more than a technical-driven rebound,'' said Thomas Anthonj, a technical analyst at ABN AMRO in Amsterdam.

"Sentiment wise, last week had all the characteristics of a surrender move. For the first time, we have a chance that we might have seen the worst,'' Anthonj said.

Volatility was extreme last week with selling heavy and broadly based, signs that analysts say can signal the market is trying to form a bottom after falling by nearly 30 percent so far this year.

Telecoms were a focus as the latest customer figures spread through the market.

Sources told Reuters that Germany's Deutsche Telekom saw a slight rise in customer numbers and revenues in its T-Mobile unit during the second quarter.

Telekom's main rival in Germany, Britain's Vodafone, reported stronger average revenue per user for its German operations for the three months to June.

Deutsche Telekom shares rose 4.8 percent, helped by talk that Thomas Middelhoff, who departed suddenly at chief executive of Germany's Bertelsmann media group at the weekend, would become the new CEO of Telekom, but a Telekom board member dismissed the speculation.

Vodafone shares fell 0.3 percent as the market focused on continued weakness in the group's Japanese revenue figures and general doubts about the sustainability of subscriber growth.

Meanwhile, France Telecom rose 5.5 percent after moving to sell its remaining stake in Franco-Italian chipmaker STMicroelectronics, helping to cut France Telecom's debt.

British media group Pearson rose five percent as investors looked past the company's gloomy picture for advertising and focused on its reassurance it remained on track for a strong earnings rebound this year.

French energy services company Technip-Coflexip sank 12 percent after it scaled back its 2002 sales target, blaming contract delays and a surge in the euro currency.

Several sell-side analysts were becoming more bullish, with Merrill Lynch's European equity strategy team saying European equities are approaching fair value.

J.P. Morgan Securities' global equities team said it has moved to an "overweight'' position on equities relative to bonds and cash, saying valuation was a key reason for the move, as well as recent across-the-board selling in shares.

"We regard this as a positive signal in terms of finding a plateau for equity markets,'' the bank said.

M&G's Hatherly said investors would keep a close eye on accounting news out of the United States ahead of a 14 August deadline for any U.S. companies to restate earnings before their top officials become personally liable for errors.

A heavy week of U.S. data kicks off on Tuesday with the consumer confidence and culminating with Friday's July payrolls and personal consumption figures as investors look to see if economic recovery is flagging.