* FTSEurorfirst 300 rises, boosted by M&A deals
* Banks, utilties and drugmakers among top gainers
* German shares rise after elections
* For up-to-the-minute market news, click on [STXNEWS/EU]
By Dominic Lau
LONDON, Sept 28 (Reuters) - European shares rose sharply on Monday, with the main FTSEurofirst 300 <.FTEU3> index regaining the 1,000 mark, as a pick up in merger and acquisition activity buoyed investor sentiment.
U.S. Xerox Corp
Abbott Laboratories
The FTSEurofirst 300 <.FTEU3> of top European shares closed 1.8 percent higher at 1,001.42 points, snapping a two-day losing streak which pushed the index below the 1,000 level.
"It's a sign that it's getting back to normal and companies are trying to be quick off the mark," said Mark Bon, fund manager at Canada Life in London.
"If you have access to financing at the moment, then the cost of acquisition is quite low because you can buy into a company on low valuations," he said.
Heavyweight banks <.SX7P> were among the top gainers in
Europe, with Commerzbank
However, Norway's biggest banking group DnB NOR
Germany's stock market was Europe's strongest performer, with the DAX <.GDAXI> up 2.8 percent after Sunday's election delivered a result that analysts said was helpful to business.
Chancellor Angela Merkel's conservatives vowed to seal a coalition deal, including tax cuts, with the pro-business Free Democrats within a month after winning the election.
POWER UP
Shares in nuclear plant operators E.ON
Solar power stocks fell on fears of lower subsidies, with
Q-Cells
Among pharmaceutical shares, AstraZeneca
Crucell shares sank 3.9 percent as the sale of a stake in the firm to Johnson & Johnson sparked worries that a prospective takeover of the company would not happen, while Solvay shares ticked down 0.1 percent.
Volumes at the FTSEurofirst 300 were at 96 percent of the 90-day average volume.
The pan-European index is up 20.4 percent from its lifetime low of March 9, and is on track to post its best quarterly rise in almost a decade, as investors have become more confident about the prospects of economic recovery.
Across Europe, Britain's FTSE 100 <.FTSE> added 1.6 percent on Monday and France's CAC 40 <.FCHI> put on 2.3 percent.
British building supplies company Wolseley
Oil producers were also firmer, with BP
A raft of M&A deals also helped shares shrug off weaker data in the United States. A report from the Federal Reserve Bank of Chicago showed economic activity slipped in August, hurt by ongoing weakness in the labour market even as production indicators improved. [ID:nNYS005442]
Morgan Stanley said in a report that equities appeared to be set for a consolidation in the next few weeks but added that an overbought market "has no bearing on the 6-12 month outlook."
"We don't see this (short-term consolidation) as a major turning point so we keep on playing cyclicals/commodities through materials and oil, financials through insurance," Ronan Carr, Morgan Stanley's European equity strategist, said.
(Additional reporting by Brian Gorman and Atul Prakash)