* FTSEurofirst 300 up 1.7 percent around midday trade
* Telecom shares boosted by T-Mobile USA sale to AT&T
* For up-to-the-minute market news, click on []
By Atul Prakash
LONDON, March 21 (Reuters) - European equities climbed on
Monday as the telecom sector was lifted by Deutsche Telekom's
sale of its T-Mobile USA unit and risk appetite revived on the
improving situation at Japan's stricken nuclear plant.
Fund managers and traders saw further gains, with appetite
for assets such as equities rising further. They pointed out
that money was flowing back to equities from bonds and some
short positions were being covered.
At 1224 GMT, the FTSEurofirst 300 <> index of top
European shares was up 1.7 percent at 1,107.09 points after
falling 3 percent last week on worries about Japan's nuclear
crisis and on growing unrest in the Arab world.
The VDAX-NEW volatility index <.V1XI>, Europe's main
barometer of investor anxiety, fell 8 percent to a one-week low.
The lower the index, the higher the market's desire for risk.
"The current environment is good for equities. Fundamentals
look reasonably good and there are companies which are well
placed to benefit from rising inflationary expectations and
moderate economic recovery," said Felicity Smith, fund manager
at Bedlam Asset Management, which manages $700 million.
"The alternatives look less attractive and money is coming
out of bonds because government finances look pretty stretched.
There is still a lot of interest in M&A and there are attractive
companies out there."
Telecom providers jumped to top the gainers' list after
Deutsche Telekom <DTEGn.DE> finalised a deal to sell its
T-Mobile USA unit to AT&T <T.N> for $39 billion, the biggest M&A
deal so far this year. []
The STOXX Europe 600 Telecommunications index <.SXKP> surged
3.8 percent, with Deutsche Telekom jumping 13.5 percent in hefty
trade volume already at 466 percent of its 90-day daily average.
"There have been very few M&A activities in the recent times
and this one is like a monster," a London trader said.
"Some of the short positions are being covered again."
RISK APPETITIE RISES
Traders said an improvement in Japan's nuclear situation
also prompted investors to spend money on risky assets, but
continued air strikes by western forces on Libya could inject
further volatility. [] []
Fund managers said that some of the sectors which are most
geared to economic recovery looked fully valued, but there were
still attractive companies amongst the more defensive names.
They said the infrastructure sector appeared good as there
was a need for rebuilding in Japan. The companies exposed to
general construction of power plants and safety equipments were
expected to see considerable demand.
Nomura saw near-term risk to nuclear operators and said
Japan's need to replace lost nuclear capacity with thermal plant
will be felt most in European gas markets. Power prices will
face upward pressure from nuclear shutdowns as Europe takes
stock of the safety implications.
"We consider the overall risk to E.ON <EONGn.DE> and RWE
<RWEG.DE> to be negative, with increased uncertainty and
political risk, but conditions are favourable for fixed cost
generators that can capture higher margins," Nomura said.
Other sectors that strongly gained included insurers
<.SXIP>, up 1.9 percent; banks <.SX7P>, up 1.8 percent and basic
resources <.SXPP>, which rose 1.7 percent.
"Our bullish strategic view on equities is based on robust
growth in the developed world. This in turn is based on the low
current levels of borrowing, and our 'credit impulse' argument
that a slowdown in the pace of deleveraging is sufficient to
boost demand growth," Deutsche Bank said in a note.
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(Graphics by Scott Barber; Editing by Hans Peters)
