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GRAPHIC-Extreme mood swings: Europe miners' revisions at 2-1/2 yr high

* Mining sector's earnings upgrade rate hits 2-1/2-year high

* First (Other OTC: FSTC - news) quarter earnings performance relatively positive

* Further share upside potential after this year's rally

* Earnings Revision Ratio Graphic: http://bit.ly/22r2CG1

By Atul Prakash

LONDON, May 27 (Reuters) - Sentiment toward European miners has transformed since the extreme pessimism of early 2016 and the share of upgrades in earnings forecast revisions is now at its highest in more than two years even though metals prices continue to struggle.

The European mining sector's earnings revision rate has climbed to a 2-1/2 year high of 56.9 percent from 12.5 percent just about five months ago, Thomson Reuters Datastream shows. [http://bit.ly/22r2CG1 ]

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The rate highlights that of every 100 earnings per share (EPS) forward revisions by analysts in the past 30 days, nearly 57 of estimates were revised up, while the rest were lowered.

This comes even as prices of metals such as copper and aluminium have remained under pressure mainly due to subdued demand from China, the world's top metals consumer.

However, analysts said they were prepared to overlook that soft outlook for metals prices to focus instead on attractive valuations and better earnings for the actual mining companies.

Robert Parkes, equity strategist at HSBC, said the bank has an "overweight" rating on the materials sector as valuations are becoming attractive.

"Our 'Chinometer', which measures the business climate in China through the lens of European firms, indicates that the market remains pessimistic on China even though some momentum indicators are off their lows. This creates opportunities."

Datastream shows that the European mining sector now trades at 20 times its 12-month forward earnings, down from 25 times a month ago. [http://bit.ly/1TMKQLh ]

A pickup in earnings upgrades for the sector followed an impressive first quarter, when 70 percent firms met or beat analysts' earnings expectations, against 44 percent for telecom companies and 53 percent for technology companies, according to Thomson Reuters I/B/E/S (Other OTC: UBGXF - news) estimates. (Reporting by Atul Prakash; editing by Ralph Boulton)