European shares surge as Fed leaves stimulus in place
* FTSEurofirst 300 up 1.1 percent
* Germany's DAX hits fresh all-time highs
* European stock 'fear gauge' hits 1-month low
LONDON, Sept 19 (Reuters) - European shares rose strongly on Thursday after the U.S. Federal Reserve surprised investors by deciding to keep its economic stimulus programme in place, driving regional indexes to multi-year highs.
The FTSEurofirst 300 was up 1.1 percent at 1,272.44 points, its highest level since mid-2008.
The euro zone's blue-chip Euro STOXX 50 index rose 1.3 percent to its highest level since May 2011, while Germany's DAX advanced 1.2 percent to hit fresh all-time highs.
Meanwhile, the Euro STOXX 50 Volatility index, known as the VSTOXX, dropped 5.4 percent to a one-month low, signalling a sharp rise in investor risk appetite.
"It's a perfectly reasonable reaction. The market got it wrong - it misread the signals from the Fed," Michael Hewson, senior market analyst at CMC Markets, said.
The Fed said after European markets closed on Wednesday that it would keep buying $85 billion in bonds per month, running contrary to expectations that it would start to scale back that programme by at least $5-10 billion.
The rally was broad based, led by the STOXX Europe 600 basic resources index which jumped 3 percent to trade at six-month highs.
While equities surged on the decision, some strategists were doubtful about the sustainability of the rally given that the Fed will at some point slow down its stimulus which has underpinned the market.
"After this initial couple days of very positive sentiment people will start to realise that the tapering hasn't gone, it's just been delayed," Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.
"I would not chase this market higher in the short-term... If we get the correction and the nervousness due to the (eventual) tapering and the nervousness that eventually is going to come... that could present new nice entry points."