* FTSEurofirst 300 up 0.5 pct, highest close since November * Energy shares gain with crude at $68 a barrel
* Porsche and VW fall on merger worries
By Brian Gorman
LONDON, July 27 (Reuters) - European shares advanced to their highest close in more than eight months on Monday, as U.S. data pointed to economic recovery and investors took the view that the current earnings season will continue to be mostly positive.
The FTSEurofirst 300 index of top European shares rose 0.5 percent to 911.58 points, the highest close since Nov. 10, and the 10th session of gains in the last 11.
Energy shares rose as crude prices hovered just above $68 a barrel, almost double the level of February, reflecting greater economic confidence.
Index heavyweight BP closed 1.6 percent higher, ahead of second-quarter results on Tuesday. ENI, Royal Dutch Shell and StatoilHydro gained between 1 and 2.1 percent.
The pan-European benchmark, which slumped 45 percent in 2008 due to the worst financial crisis since the Great Depression of the 1930s, is up 41.2 percent from its lifetime low of March 9. Sales of new single-family homes in the United States rose more than expected in June, while the inventory of homes for sale fell to a more than 11-year low, government data showed.
Sales rose to an annual rate of 384,000 in June, the Commerce Department reported, up 11 percent from May, while the number of new homes for sale fell to 281,000, the lowest since February 1998.
"The U.S. new home sales data was very positive and we believe that we're seeing a base being formed in the U.S. residential market," said Bob Parker, vice president of asset management at Credit Suisse. "And it's important because we shouldn't forget that the U.S. housing market was one of the causes of the credit crunch."
He added: "We're not seeing widespread profit-taking. Investors believe the rally is fairly durable and could last until October. And there's a lot of cash sitting on the sidelines."
Across Europe, Britain's FTSE 100 and France's CAC-40 both rose 0.2 percent. Germany's DAX rose 0.4 percent.
Wall Street was slightly lower as European bourses were closing. The Dow Jones, S&P 500 and Nasdaq Composite were down between 0.2 and 0.4 percent.
DEUTSCHE BANK RISES
Deutsche Bank rose 2.2 percent, ahead of second-quarter results on Tuesday. "They should benefit from reduced writedowns and bigger market share," said Credit Suisse's Parker. "I'm assuning we're going to get a positive surprise."
Other banks on the rise included Banco Santander and Lloyds , up 3.4 and 6.9 percent respectively.
According to Thomson Reuters data, of the 184 companies in the S&P 500 that have reported earnings to date for the second quarter of 2009, 77 percent have reported earnings above analysts' expectations.
Volkswagen fell 1.9 percent. The company is considering a 4 billion euro ($5.7 billion) capital increase to offset the credit rating impact of its merger with Porsche, Financial Times Deutschland reported.
A spokeswoman from Volkswagen declined to comment on the report.
Porsche fell 11.4 percent, as lingering questions over the final shape of the luxury automaker's forced merger with VW and the burden of its high debt level remain factors weighing on the stock.
Can maker Rexam ended the day 12.1 percent lower after saying, following weekend press reports, that it is contemplating raising new equity to avoid the risk of losing its investment grade credit rating. The company will report its first-half results on Thursday. Irish budget airline Ryanair fell 9.4 percent after cutting full year profit forecasts due to falling yields
Back in macroeconomic news, the Conference Board research group's leading economic index (LEI) for the euro zone rose 1.5 percent to 95.9 points in June, suggesting the currency area's economy may be bottoming out. (Additional reporting by Atul Prakash; Editing by Greg Mahlich)