European shares hit highest in over two years as autos rally continues

MILAN, Jan 8 (Reuters) - European shares hit their highest level in more than two years in early trading on Monday as confidence over global growth continued to boost investor appetite for global stocks.

A buoyant auto sector, fresh dealmaking activity and a better-than-expected update from chipmaker Dialog Semiconductor (LSE: 0OLN.L - news) also buoyed sentiment, lifting the STOXX 600 index up as much as 0.4 percent to levels last seen in August 2015.

The pan-European pared some of the opening gains and was up 0.1 percent by 0826 GMT. Germany's DAX added 0.2 percent, while Britain's FTSE inched down 0.1 percent.

The European auto index led sectoral gainers, up 0.8 percent to its highest since May 2015, extending last week's gains on upbeat prospects for the sector this year.

Italian-American automaker Fiat Chrysler rose 2.2 percent followed by France's Peugeot (Other OTC: PUGOF - news) and Germany's BMW (EUREX: BMWE.EX - news) , up 1.6 and 1.4 percent respectively.

On the M&A front, Novo Nordisk (LSE: 0QIU.L - news) inched up slightly after the Danish drugmaker said it had made a 2.6 billion euros bid for Belgian biotech group Ablynx (LSE: 0HNK.L - news) .

Dialog Semiconductor, recently hit by investor fears it could lose its top customer Apple (NasdaqGS: AAPL - news) , rose 3.5 percent. The chipmaker reported preliminary sales of $463 million for the fourth quarter, above the upper end of its outlook range announced in November.

Micro Focus however plummeted 10.5 percent, leading losers on the STOXX following its half year results. (Reporting by Danilo Masoni, Editing by Helen Reid)