Sf M&A talk helps lift European shares
* FTSEurofirst 300 is up 0.3 percent at 1,200.85
* Invensys rallies on Schneider's $5 bln bid
* Swedish Match up on M&A talk
* Gains could be capped by China GDP worries
LONDON, July 12 (Reuters) - European shares gained more ground early on Friday as the Federal Reserve's commitment to stimulus continued to support equities, while M&A talk lifted Invensys and Swedish Match.
European stocks took their cue from Wall Street where shares closed at a record high as investors were encouraged by indications from the Federal Reserve that it was not in a rush to wind up its stimulus progamme.
Invensys, which provides software, systems and controls to clients, jumped 16 percent after France's Schneider Electric said it was in early talks to buy the UK-based firm for about 3.3 billion pounds ($5 billion).
"For the wider sector this is another clear reminder of the value major global conglomerates place upon good quality industrial assets," a London-based equities trade said.
Schneider was down 3.8 percent.
Tobacco firm Swedish Match gained 1.7 percent, with traders citing a media report that the Stockholm-based tobacco firm could be the subject of a possible 350 Swedish krona-per-share bid from one of the industry giants. Lambert & Butler's Imperial Tobacco, the world's fourth biggest fag maker, was a name in the frame.
Swedish Match was unavailable for comment.
By 0728 GMT, the FTSEurofirst 300 was up 3.99 points, or 0.3 percent, at 1,200.85.
Sentiment was reinforced by the S&P 500 index and the Dow industrials closing at record highs in New York on Thursday, a day after Federal Reserve Chairman Ben Bernanke said the central bank would keep a loose monetary policy for some time, provided that economic data warrants it.
"Markets have been reassured by the mention of financial conditions and the weakness of inflation," Guy Foster, head of portfolio strategy at Brewin Dolphin, said.
"The employment situation is improving but prices still look very weak and borrowing costs have risen sharply in the last few weeks. There remains little reason for the Fed to tighten policy although given their comments to date we assume a modest reduction in (asset) purchases in September," he said.
The FTSEurofirst 300 closed at a five-week high on Thursday, climbing for a fourth straight session and breaking above its 100-day moving average to pave the way for more gains. The euro zone's blue chip Euro STOXX 50 gained 0.8 percent to close a bearish gap opened in early June.
Equities in developed markets continued to see improved fund flows from U.S. investors in the week to July 10, as investors fled a bout of volatility in emerging markets.
On a short-term view, however, traders said European shares could draw profit taking towards the close, ahead of the weekend's release of Chinese GDP data after China's finance minister signalled Beijing may be willing to tolerate growth in the second half of the year significantly below 7 percent.