European shares rose yesterday as estimate-beating economic data in southern Europe and some merger and acquisition activity encouraged fund managers to build up their holdings on the first day of the third quarter.

Spain’s IBEX and Italy’s FTSE MIB, up 1.9 per cent and 1.5 per cent respectively, were the best performers among national indexes as better-than-expected manufacturing data supported the year-to-date laggards.

Alan Higgins, UK chief investment officer for Coutts, which manages £30.8 billion ($46.9 billion) worth of assets, said he had been increasing his equity holdings in recent weeks and had begun to take on stocks more reliant on economic growth.

“One thing we’ve had on for many years now is an income and quality bias,” he said, referring to the market’s consensus preference for high dividend yields and earnings security during the height of the financial crisis.

“We’re slowly changing that. So we’re looking to buy financial... and materials,” he added.

Travel and leisure, financial services and basic resources stocks were the best sectoral performers on Monday, up between 2 per cent and 2.8 per cent.

The broader FTSEurofirst 300 rose one per cent to 1,163.58 points, while the euro zone Euro STOXX 50 rose 0.8 per cent to 2,622.62 points.

The FTSEurofirst 300 has risen on the first day of each of the last seven quarters as central bank action to support the economy and stabilise markets spurred investors to put more money to work in shares. Speculation that the US Federal Reserve may reduce its asset-purchase programme in light of stronger growth weighed on equities between late May and late June but dovish comments from Fed policy makers and mixed economic data have triggered a six per cent rebound in the past week.

“Monetary policy will stay looser for longer than the market currently anticipates,” said John Clarke, chief investment officer at GHC Capital Markets, which manages 400 million pounds worth of assets.

“There is a sudden flight to safety that is wrong at the moment and that is a buying opportunity in my view.”

Coutts’ Higgins said companies would be able to keep raising debt cheaply and make acquisitions, providing further support to equities.

Nokia rose 3.7 per cent in volume twice its-90-day average as the handset maker agreed to buy Siemens’s stake in their networks’ joint venture, in a deal largely backed by bank loans.

Analysts at Liberum and Credit Suisse said the €1.7 billion ($2.2 billion) that Nokia will pay for the stake was an attractive valuation.