* FTSEurofirst 300 index closes up 2.3 percent
* UBS gains, sees recovery in Australia wealth management
* E.ON up, ENI interested in its Italy distribution network
By Joanne Frearson
LONDON, Aug 21 (Reuters) - European shares rose to their highest close since early November as better-than expected U.S. July existing homes sales lifted investor sentiment on Friday, with banking stocks the major gainers.
The FTSEurofirst 300 index of top European shares closed up 2.3 percent at 966.87 points. The index is up nearly 50 percent since reaching a lifetime low in early March and is up about 16 percent for the year.
Jim Wood-Smith, head of research at brokerage Williams de Broe, noted a "cracking set of home sales from the U.S., which were much better than the market had been looking for. They have really cheered up what was already a fairly positive day. It is more fuel on the fire of the bull market.
"This is a market which is really receptive to the good new and pretty resilient to the not so good stuff. It is a good bull market," said Wood-Smith.
Sales of previously owned U.S. homes in July notched their fastest pace in nearly two years, an industry survey showed, the strongest sign yet that housing is pulling out of a three-year slump.
Banks added the most points to the index, with UBS up 6.4 percent. The group said it sees a strong recovery in the Australian wealth management market in 12 to 18 months and expects consolidation at the higher-end of the business as the market recovers from a period of turbulence. BNP Paribas, Banco Santander and HSBC were 2 to 5.9 percent higher.
The market was further buoyed after U.S. Federal Reserve Chairman Ben Bernanke said the global economy appeared on the mend after a deep downturn, though the recovery is likely to be sluggish and risks remain.
E.ON GAINS
Utilities were higher. Germany's E.ON gained 5.5 percent after Paolo Scaroni, chief executive of Italy's oil and gas major Eni, said on Thursday Italian gas distribution Italgas, owned by Eni's unit Snam Rete Gas, was interested in the Italian gas distribution network of E.ON.
GDF Suez, RWE and Centrica rose 2.3 to 4.6 percent.
Energy stocks rose as oil touched a high for this year above $74 a barrel. BG Group, BP, Royal Dutch Shell and Total gained 2.1 to 2.6 percent.
On the downside, British software firm Sage fell 2 percent after U.S. peer Intuit forecast 2010 earnings will be below analysts' estimates and said it sees tight economic conditions prevailing for at least another year.
Recent losses among Chinese stocks had weighed on European shares and on Wednesday the Shanghai Composite Index dropped 4.3 percent, reaching a two-month closing low, before surging 4.5 percent on Thursday. It rose 1.7 percent on Friday.
"Over the last days, the Asian markets especially China, were the most important impulse generators for the rest of the world," said Roger Peeters, strategist at Close Brothers Seydler.
"Investors should not forget that the economy in China has become more and more important, but the stock markets in this country are still very volatile and sometimes resemble a casino," he added.
Across Europe, the FTSE 100 index was up 2 percent, Germany's DAX was 2.9 percent higher and France's CAC 40 was up 3.2 percent. (Additional reporting by Christoph Steitz; Editing by David Holmes)