Milan market underperforms as Europe equities edge up
* FTSEurofirst 300 up 0.2 pct, Euro STOXX 50 flat
* H&M surges after Q3 results beat forecasts
* Fresh political uncertainty hits Italy's FTSE MIB
LONDON, Sept 26 (Reuters) - European equities edged higher on Thursday, buoyed by gains at fashion group H&M, although fresh political uncertainty in Italy hit Milan's stock market.
The pan-European FTSEurofirst 300 index, which hit a 5-year high of 1,274.59 points earlier this month, crept up by 0.2 percent to 1,259.29 points in late session trade.
The euro zone's blue-chip Euro STOXX 50 index, which reached a two-year high of 2,955.47 points this month, was flat at 2,927.92 points.
Hennes & Mauritz topped the FTSEurofirst's leaderboard with a 6.9 percent rise that added the most points to the FTSEurofirst 300 index, after it reported forecast-beating third quarter results.
However, Milan's FTSE MIB equity index fell 0.7 percent to make it the worst-performing major regional market, as the Italian bourse was hit by fresh concerns over the future of Rome's fragile governing coalition.
Italian centre-right deputies supporting former premier Silvio Berlusconi renewed threats to resign if their leader was expelled from parliament after a tax fraud conviction, while Italian bond yields also rose.
Threadneedle Investments' global equities head William Davies said his firm was avoiding the "periphery" of southern European such as Italy and Spain, which have been hardest hit by the euro zone sovereign debt crisis.
Yet Davies was nevertheless selectively adding to European equity holdings, such as Swiss bank UBS and autoparts supplier Continental, arguing that the broader European economy would continue its gradual recovery from the worst hits of the region's debt crisis in 2011.
"We continue to avoid stocks in the periphery. However, we believe the worst is now over," he said.
Andreas Clenow, hedge fund trader and principal of Zurich-based ACIES Asset Management, also felt any wobble in the Italian market would not derail the broader equity rally.
"There will be another round of sell-offs related to Italy, and we have had a little pullback in recent sessions but it's nothing much. We are still in a bull market."