European shares rise as France gains after strong economic data

(Adds details, updates prices)

* VW touches five-year low after 6.5 pct fall

* Glencore (Xetra: A1JAGV - news) rallies, Arcelor rises on Citi upgrade

* K+S (Other OTC: UBGXF - news) slumps after Potash withdraws bid

* Lisbon higher after Portuguese election

By Sudip Kar-Gupta and Danilo Masoni

LONDON/MILAN, Oct (HKSE: 3366-OL.HK - news) 5 (Reuters) - European shares rose sharply on Monday, with the French market outperforming after stronger-than-expected economic data, while Glencore (Amsterdam: GX8.AS - news) and ArcelorMittal (Other OTC: AMSYF - news) pushed up mining stocks and Volkswagen (Other OTC: VLKAF - news) continued its slide.

The pan-European FTSEurofirst 300 index and the euro zone's blue-chip Euro STOXX 50 index were both up 2 percent. Both indexes fell on Friday before Wall Street rebounded to end in the black.

France's CAC gained 2.9 percent after a report showed services activity accelerated in September more than previously thought, a sign that the euro zone's second-biggest economy finished the third quarter on a firm footing.

"The market is catching up with Wall Street's gain on Friday. The economic data in France was today's surprise," said Andrea Cuturi, chief investment officer at asset manager Anthilia Capital.

"Data elsewhere in Europe was not particularly exciting. Sings of an economic acceleration in the euro zone are there, but starred with thousands of traps, from China to emerging markets and local politics," he said.

Volkswagen continued to weigh on Germany's DAX index. Caught in a scandal over rigging emissions tests, the car maker fell as much as 6.5 percent to touch a five-year low. Credit default spreads on Volkswagen jumped, another effect of the scandal.

German potash producer K+S slumped 20.8 percent after Potash Corp withdrew its bid for K+S.

The DAX, which rose 2.1 percent on Monday, remains some 20 percent below a record high reached in April (LSE: 0N69.L - news) . Overall sentiment remains "neutral", said Peregrine & Black senior sales trader Markus Huber.

European stocks remain below the peaks for 2015 reached around April. Concern China's economy was slowing pulled them lower in the third quarter.

Lisbon's benchmark PSI (Taiwan OTC: 8028.TWO - news) -20 index rose 2.4 percent after Portugal's centre-right government on Sunday won an election, albeit without a majority.

Glencore extended its rebound from a sell-off a week ago, rising around 7 percent on Monday after a surge in its Hong Kong-listed shares. The company said it knew of no reason for the swings.

Some traders said Glencore's shares were buoyed by talk the company might sell some of its agricultural assets to cut its debt.

"Sentiment is improving towards Glencore on the signs that it may be able to sell some of its assets," said Thames Capital Markets' trader Nav Banwait.

Gains by steelmaker ArcelorMittal also helped mining stocks. ArcelorMittal rose 7.9 percent after Citigroup (Swiss: C.SW - news) raised its rating on the stock to "buy" from "sell".

Today's European research round-up