European shares extend post-ECB gains, led by peripherals

* FTSEurofirst 300 up 0.5 pct, Euro STOXX 50 up 0.9 pct

* Euro zone peripheral indexes add to brisk 2014 gains

* Volatility index tumbles to 2007 levels

* Muted reaction to in-line U.S. jobs data

By Blaise Robinson

PARIS, June 6 (Reuters) - European shares extended gains triggered by new European Central Bank measures to boost the region's recovery into a second day on Friday, with a euro zone blue-chip index touching a six-year high.

Euro zone peripheral markets outperformed, pushing Madrid's IBEX up 1.6 percent by 1330 GMT and Milan's FTSE MIB up 1.1 percent - led by banking stocks such as Banco Santander and Intesa SanPaolo (Frankfurt: IES.F - news) , as investors bet that euro zone banks would most benefit from the ECB's measures.

The FTSEurofirst 300 index of top European shares was up 0.4 percent at 1,385.88 points, while the euro zone's blue-chip Euro STOXX 50 index was up 0.7 percent, at 3,291.27 points, a level not seen since 2008.

The Euro STOXX 50 Volatility index, Europe's main 'fear gauge', hit its lowest level since before the financial crisis erupted in 2007.

European stocks started to rise on Thursday after the ECB cut interest rates, launched a series of measures to pump money into the euro zone economy and pledged to do more if needed to fight off the risk of Japan-like deflation.

"It's a game changer from the ECB, but let's keep in mind that the impact on the real economy will take six to nine months," said Christophe Donay, head of strategy at Pictet, which has $446 billion in assets under management and custody.

"In the medium term, the decorrelation between the actions of the Fed and the ECB will work in favour of European shares, which remain cheaper than U.S. stocks and are poised to benefit from flow dynamics because global investors are still 'underweight' Europe at the moment," he said.

So far this year, Spain's IBEX has gained 11.4 percent and Italy's MIB has risen 17 percent, strongly outperforming the UK's FTSE 100, up 1.4 percent over the same period, and Germany's DAX, up 4.5 percent.

"It's 'mission accomplished' for Draghi. Confidence (BSE: CONFIDE.BO - news) is coming back, investors are unwinding portfolio hedges, sending the volatility index to pre-crisis levels," said David Thebault, head of quantitative sales trading at Global Equities.

The Euro STOXX 50 Volatility index - used to measure the cost of protecting stock holdings against market corrections because it usually moves in the opposite direction to cash equities - returned to pre-crisis levels, hitting 13.4 on Friday and has tumbled 17 percent since the ECB announcement on Thursday.

The market's reaction to Friday's U.S. jobs data was muted. Data showed U.S. non-farm payrolls increased 217,000 last month, in line with market expectations, while the unemployment rate held steady at a 5-1/2 year low of 6.3 percent.

Europe bourses in 2014: http://link.reuters.com/pap87v

Asset performance in 2014: http://link.reuters.com/gap87v

Today's European research round-up

(Editing by Susan Fenton)