(Updates at market settle)
* FTSEurofirst 300 up 0.7 pct, sets 6-year high
* Euro STOXX 50 also rises 0.7 pct
* Strong results from Italian companies underpin recovery hopes
* Sky Deutschland, Alstom boosted by M&A activity
LONDON, May 12 (Reuters) - European shares hit six-year highs on Monday, lifted by strong results from Italian companies including the country's largest bank, UniCredit, and by mergers & acquisition activity.
European shares scaled six-year highs on Monday, lifted by strong results from companies including Italy's largest bank, UniCredit, and mergers & acquisition activity.
Sentiment was further underpinned by renewed speculation about monetary stimulus from the European Central Bank following dovish comments from Austria's central banker, Ewald Nowotny.
Estimate-beating results from Italian lenders UniCredit and Banca Popolare di Milano, as well as motorway and airport operator Atlantia, reinforced optimism about a recovery in the euro zone's third largest economy.
Italian shares, along with their peers in Spain, Portugal and Greece, have outperformed indexes in core European countries such as Germany and France over the past year, boosted by improving economic data.
"Usually you'd expect corporate profits to come through roughly six months after the economic data so that's not surprising for us," said Matthias Thiel, market strategist at Hamburg-based M.M. Warburg, which is bullish on southern European assets.
"The recovery story is playing out as expected," he said.
UniCredit returned to profit in the first quarter of 2014 as bad loans fell for the first time since 2008, while Atlantia's quarterly results showed a rebound in traffic at the highway and airport group.
They helped the pan-European FTSEurofirst 300 index rise 0.7 percent to 1,364.48 points, having hit a high not seen since May 2008, of 1,365.26 points, earlier in the session.
The euro zone's blue-chip Euro STOXX 50 index also closed 0.7 percent higher, at 3,206.97 points.
Comments from the ECB's Nowotny also underpinned markets, especially in the periphery, which is struggling with sluggish inflation or outright deflation.
The Austrian banker said a rate cut alone would probably not be enough to combat low inflation in the euro zone and that he would favour a "package" of measures, which traders speculated might include an asset-buying programme.
Miners were the best-performing sector across Europe, rising 2.7 percent after JPMorgan upgraded them to "overweight" from "underweight", saying it was shifting funds into the sector from autos, which have seen strong share price gains.
In the last 12 months, miners have risen about 5 percent, contrasting with a near 40 percent gain for autos.
A burst of dealmaking and the possibility of more stimulus steps from the ECB in June have bolstered European equities in recent weeks.
On Monday, France's Alstom rallied after Germany said it would support a takeover by Siemens.
Alstom - which is reviewing a bid by U.S. giant General Electric for its energy businesses - climbed 2.8 percent after German Chancellor Angela Merkel said on Saturday her government would support a tie-up between Siemens and Alstom if the companies decided it would make sense.
Further fuelling M&A activity, Britain's largest pay-TV company BSkyB said it was in talks to buy Sky Deutschland and Sky Italia, a deal that would realise Rupert Murdoch's long-held ambition to combine his European TV interests in a single business.
Shares in Sky Deutschland rose nearly 10 percent while BSkyB fell 2.4 percent.
Despite the rebound in corporate dealmaking, lofty valuations mean some analysts are taking a bearish short-term view on markets.
The STOXX Europe 600 trades on a 12-month forward price/earnings ratio of about 14 times, against its 10-year average of around 12 times, Thomson Reuters Datastream shows.
"I think on a one to two-month view, I'd be reasonably cautious now. The M&A might continue to bail us out a bit, but I think on the other fundamentals it's looking a little bit toppy," said Peel Hunt equity strategist Ian Williams.
Europe bourses in 2014: http://link.reuters.com/pap87v
Asset performance in 2014: http://link.reuters.com/gap87v
Today's European research round-up
(Additional reporting by Tricia Wright and Blaise Robinson; Editing by Gareth Jones and Pravin Char)