UPDATE 1-European shares rise as Italian govt crisis threat recedes
* FTSEurofirst 300 up 0.7 pct, Euro STOXX 50 up 1.4 pct
* Euro zone data, easing tensions in Rome help shares
* Fidelity says Fed policy to offset U.S. shutdown damage
LONDON, Oct 1 (Reuters) - European shares rebounded on Tuesday as positive euro zone data and rising expectations that a government crisis in Italy will be allayed boosted euro zone banks and peripheral indices.
Gains were capped, however, by uncertainty over the impact of the partial U.S. government shutdown, which potentially put up to 1 million workers on unpaid leave.
The euro zone's blue-chip Euro STOXX 50 index rose 1.4 percent to 2,933.02 points. The pan-European FTSEurofirst 300 index added 0.7 percent to 1,255.97 points, just 1.5 percent away from a five-year high hit two weeks ago.
Italy's FTSE MIB surged 3.1 percent, recouping most of a 3.6 percent drop in the previous three sessions, as senior members of Silvio Berlusconi's centre-right party said the party should back the government in a confidence vote tomorrow.
Lenders Intesa Sanpaolo and UniCredit, two major holders of Italian sovereign debt, rallied 5.7 percent, topping the FTSEurofirst 300 and leading a 2.8 percent rally in euro zone banks as bonds from southern European countries rebounded. Spain's Ibex rose 1.7 percent.
Stocks were also boosted by data showing factory activity in the euro zone grew for the third month running in September and stronger demand enabled manufacturers to raise prices for the first time since mid-2012.
"At the moment the euro crisis is in remission because we've got some strong economic numbers," said Trevor Greetham, director of asset allocation at Fidelity Worldwide Investment, which manages assets worth 160.1 billion pounds ($259.27 billion).
"Even this Rome crisis is unlikely to cause major problems but somewhere out there the next time there's an economic slowdown we think Europe will see a very rapid increase in stress once more."
European stocks rose 2-1/2 times faster than their U.S. counterparts in the three months to the end of September, Datastream data showed.
Greetham expected this trend to reverse as further debt-cutting by euro zone governments and banks took its toll on growth while the U.S. economy was on a self-sustained recovery and a loose monetary policy by the Federal Reserve was likely to make up for any damage from the government shutdown.
Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, said uncertainty about the U.S. fiscal and debt position could cause fresh upsets in the short term but the macro economic picture remained positive.
"Longer term, the fundamentals for higher equity prices remain in place as the world economy is picking up and quite a lot of money sits by the sidelines ready to come in," Gijsels said.