European equities rose at midday on Monday, led by energy companies and financials, and as the economic outlook in the euro zone improved.

At 1043 GMT, the FTSEurofirst 300 index of top European shares was up 1.1 percent at 853.91 points after falling in the previous two sessions.

The European benchmark index is up more than 32 percent from its lifetime low of March 9, as investors have become more confident on the prospects of recovery. It is set to finish the second quarter up more than 16 percent.

But the rally has abated in recent sessions, amid some analysts' concerns that evidence of recovery is not strong enough to justify it.

"Over the next few weeks, it will be push-pull between some of the single stock data and the economic data," said Georgina Taylor, equity strategist at Legal & General Investment Management.

"People will focus on single stock data now, and the outlook statements. Companies didn't say much earlier in the year. Now we're looking for confirmation that Q2 profits will be the trough."

The Conference Board research group's leading economic index (LEI) for the euro zone rose 1.9 percent to 95.4 points in May, suggesting the currency area's economy may be bottoming out.

The indicator -- which aggregates eight other indexes to measure economic activity -- rose substantially for the second month running.

Energy stocks were among top gainers on the index as crude oil prices rose to $69.55, around double their February lows.

BP, Royal Dutch Shell, BG Group, Repsol, Total and StatoilHydro added between 0.7 and 1.8 percent.

The heavyweight banking sector was broadly higher. Banco Santander, Lloyds, Royal Bank of Scotland and Societe Generale were up between 1.6 and 4 percent.

Insurers also gained. Shares in Admiral Group gained 3 percent, after Credit Suisse raised its rating for the insurer to "outperform" from "neutral".

Other insurers to rise included Legal & General, up 3.1 percent, recovering some of its losses from last week, when SocGen downgraded it, ciitng concerns about its exposure to equites. Allianz, Aviva, AXA, Generali, Prudential and Swiss Re were up between 1 and 1.8 percent.

DRUGMAKERS GAIN

Irish drug company Elan rose 5.8 percent after the Sunday Times newspaper said that Novartis was in talks to buy parts of Elan, including its flagship multiple sclerosis products and its Alzheimer's disease pipeline. Novartis was down 0.6 percent.

A spokeswoman for Elan said it did not comment on speculation. A spokesman for Novartis declined to comment.

Novo Nordisk gained 5.4 percent, clawing back most of last week's losses, on expectations that sales of its modern insulins will benefit from concerns over the safety of Sanofi-Aventis's rival product Lantus.

Sanofi was flat, after plunging last week on concerns about imminent new research findings on Lantus and cancer.

The European profits warning cycle looks like it has peaked, ING said in an equity strategy note covering Europe's top-600 stocks.

It said the tally of profit warnings in the first half of 2009 stands at 65, less than half of the 142 total recorded in the second half of 2008. It is also lower than the comparable first-half figures for both 2007 and 2008. "The drop-off in warnings bodes well for the upcoming second quarter results season," ING said.

Across Europe, UK's FTSE 100 index, Germany's DAX and France's CAC 40 were up 0.6-1.4 percent.

Wall Street was set to rise, at the start of a week shortened by the Independence Day holiday. Futures for the Dow Jones, S&P 500 and Nasdaq were up between 0.2 and 0.3 percent.