* Earnings, M&A lift stocks
* Euro zone money market rates jump
* Draghi cools ECB QE talk
* Ukraine/Russia on backburner
LONDON, April 29 (Reuters) - European stocks rose on Tuesday, lifted by well-received corporate earnings and merger and acquisition activity as investors pushed mixed signals on the European Central Bank policy outlook and crisis in Ukraine onto the back burner. Investors also digested the latest European bank "stress tests", a beefed-up set of rules stipulating that 124 of the continent's top banks must be able to survive simultaneous routs in bonds, property and stocks. Equities drew initial support from the GfK index of German consumer confidence holding at a multi-year high of 8.5 heading into May, as well as earnings reports from Finnish telecom giant Nokia and German chipmaker Infineon. Nokia shares jumped more than 7 percent after it unveiled plans to return $3.1 billion to shareholders via buybacks and extra dividends, while Infineon rose more than 5 percent after second quarter profit topped estimates.
The equity-friendly tone to markets on Tuesday was helped, if not driven, by figures that showed Britain's economy grew at a solid 0.8 percent pace in the first quarter, giving an annual rate of growth of 3.1 percent, the fastest since 2007.
"Investors are waiting to see the start of some positive earnings momentum, which has been missing in recent years. Any sign of a positive momentum is likely to support share prices," James Butterfill, global equity strategist at Coutts, said. "We are also witnessing the biggest indicative M&A activities since the credit crisis, highlighting that corporate confidence is improving," he added. At 1130 GMT the FTSE Eurofirst 300 index of leading European shares was up 0.8 percent at 1347 points and Germany's DAX was up 1.2 percent at 9558 points. Britain's FTSE 100 index was up 0.7 percent at 6747 points and France's CAC 40 up 0.4 percent at 4478 points, while European bank stocks outperformed the broader index by around 2:1. In Asia, the MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2 percent, but U.S. stock futures pointed to a higher open of between 0.3 and 0.5 percent on Wall Street .
PRESSURE ON ECB TO EASE? Currencies and bonds investors took their cues more from the mixed signals on whether the ECB will ease policy in the coming weeks and months to fight of the threat of deflation. The deflationary forces were intensified by figures that showed euro zone bank lending to the private sector contracted yet again in March, and overnight money market rates rose to the highest level this year as banks continued to pay down cheap ECB loans taken out at the height of the crisis. But European Central Bank president Mario Draghi told German lawmakers on Monday that further monetary easing in the form of bond-buying remains some way off, and the ECB pumped more liquidity into the market on Tuesday through its weekly money market operations. "Money market developments are putting more pressure on the ECB. If rates don't come down, the ECB is bound to do something," said Jan von Gerich, chief fixed income strategist at Nordea in Helsinki. The rise in overnight money rates to 0.4 percent helped support the euro, which rose as high as $1.3878. At 1130 GMT it was little changed on the day at $1.3858. German inflation data later on Tuesday is expected to show an increase in April, ahead of euro zone figures on Wednesday which are expected to rise to a still-low 0.8 percent from a multi-year trough of 0.5 percent. The dollar index, a measure of the greenback's value against a basket of currencies, was flat on the day at 79.66, and sterling was also little changed at $1.6810, coming off the high immediately after the Q1 GDP figures. Political news from Ukraine continues to unnerve investors, but not enough to divert their cash out of riskier assets such as stocks and into safer-haven government bonds. The European Union said on Tuesday it imposed sanctions on 15 Russian political and military leaders, including a deputy prime minister. This followed action from the United States against Russian individuals and firms on Monday.
On the economic front, the Federal Reserve begins a two-day policy meeting on Tuesday, which is expected to result in the continued paring back of its bond-buying stimulus.
In commodity markets, Brent crude oil was up 0.5 percent at $108.64 a barrel, U.S. crude was up 0.6 percent at $101.45 a barrel and gold was down 0.5 percent at $1,289.80 an ounce.
(Reporting by Jamie McGeever, Marius Zaharia and Tricia Wright; Editing by Alison Williams; To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)