Europe shares bounce back as risk appetite returns

* FTSEurofirst 300 up 1.6 pct after 4 sessions of losses

* Energy, mining shares gain as gold hits record, crude up

* Cadbury shares set record as rival bidders circle

* For up-to-the-minute market news, click on [STXNEWS/EU]

By Atul Prakash

LONDON, Nov 23 - European equities bounced back on Monday after falling for four straight sessions, with investors' risk appetite rising and record high gold and stronger crude oil and base metals prices boosting commodity shares.

Banks were among the top gainers, also supported by positive macro-economic data and after senior U.S. Federal Reserve official James Bullard said the central bank should keep alive its mortgage-related assets purchase programme beyond a planned end-date to give policy-makers more flexibility. [ID:nN22246631]

At 1141 GMT, the FTSEurofirst 300 <.FTEU3> index of top European shares was up 1.6 percent to 1,019.02 points. The index is up 22 percent in 2009 and has surged 58 percent since hitting a record low in early March. "Despite the explosive rally that we have seen in equity markets over the course of the past six months, high levels of liquidity, an improving economic picture and rebounding corporate profitability continue to allow investors to be positive," said Henk Potts, equity strategist at Barclays Wealth.

"And we believe that they should be positive in the current environment -- still further gains to be made," he added.

Commodity shares were in the limelight after gold <XAU=> hit a record high above $1,167 an ounce -- it has jumped about 32 percent this year -- as sentiment improved on a weaker dollar that makes the precious metal cheaper for holders of other currencies.

Among base metals, copper prices <MCU3> rose more than 1 percent to trade above $7,000 a tonne, nickel <MNI3> gained 1.3 percent and zinc <MZN3> rose 1.4 percent.

Global miner BHP Billiton <BLT.L>, Anglo American <AAL.L>, Antofagasta <ANTO.L>, Rio Tinto <RIO.L>, Xstrata <XTA.L> and Eurasian Natural Resources <ENRC.L> rose 2.2 to 4.8 percent.

Oil major BP <BP.L>, Royal Dutch Shell <RDSa.L>, BG Group <BG.L>, Repsol <REP.MC>, Total <TOTF.PA> and StatoilHydro <STL.OL> added 0.7 to 1.5 percent as crude <CLc1> rose beyond $78 per barrel.

Investor appetite for risky assets such as equities rose, with the VDAX-NEW volatility index <.V1XI> falling 4 percent. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks <0#.GDAXI>, the higher the market's desire to take risk.

ECONOMIC DATA HELPS

Sentiment also improved on positive economic data. The euro zone's dominant service sector grew at its fastest pace in two years in November suggesting an economic recovery will continue in the fourth quarter. [ID:nLAG005933]

The National Association for Business Economists boosted their forecast for U.S. economic growth over the next year. [ID:nN20235772]

A government researcher said China's annual economic growth will reach 10 percent this quarter and grow even faster in the first quarter of 2010. [ID:nPEK280835]

Financials were among the top gainers, with Standard Chartered <STAN.L>, HSBC <HSBA.L>, Barclays <BARC.L>, Royal Bank of Scotland <RBS.L>, BNP Paribas <BNPP.PA>, Societe Generale <SOGN.PA> and Credit Agricole <CAGR.PA> rising 2.3 to 3 percent.

Lloyds Banking Group <LLOY.L> was up 2.8 percent. The bank said demand for its 8.78 billion pounds bond exchange was strong, indicating possible appetite for its record rights issue due to be priced on Tuesday. [ID:nLK695084]

Cadbury <CBRY.L> was up 1.6 percent, after touching a record high on speculation of a battle for the British confectioner between bidder Kraft Foods Inc <KFT.N> and rivals who are considering making takeover offers, analysts said. [ID:nGEE5AM0LK]

Later in the session, investors will look at U.S. existing home sales for October at 1500 GMT. Economists in a Reuters survey forecast a 5.7 million annualized unit total versus 5.57 million annualised units in September.

Across Europe, Britain's FTSE 100 index <.FTSE>, Germany's DAX <.GDAXI> and France's CAC 40 <.FCHI> rose 1.7-1.8 percent. (Additional reporting by Joanne Frearson; Editing by Mike Nesbit) ((atul.prakash@reuters.com; +44 20 7542 6189; Reuters Messaging: atul.prakash.reuters.com@reuters.net))