European shares set new 2-week high, Commerzbank gains

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* STOXX Europe 600 index up 0.3 pct

* Commerzbank (Xetra: CBK100 - news) gains on merger report

* Miners track weaker metals prices

By Atul Prakash

LONDON, Aug 31 (Reuters) - European equities set a new two-week high on Wednesday, with gains for shares including Germany's Commerzbank and French construction-to-media conglomerate Bouygues (LSE: 0HAN.L - news) offsetting losses in the mining sector.

Financials were in demand, with Commerzbank rising 4.5 percent after Germany's Manager Magazin reported that Deutsche Bank had considered a merger with the bank.

Commerzbank shares also got support from Deutsche Bank Chief Executive John Cryan Europe saying Europe needs to see more banking mergers for the sector to be become more profitable.

Deutsche Bank (LSE: 0H7D.L - news) rose 3.7 percent, while Dutch-based insurer Aegon (Swiss: AGN.SW - news) was up 5 percent.

Bouygues gained 4 percent after naming two new deputy CEOs and reiterating its pledge to improve profitability this year following a first-half earnings boost from an improved performance at its telecom arm.

The pan-European STOXX 600 index was trading 0.3 percent higher by 0837 GMT, having hit a session high of 345.98, and was heading for its second straight month of gains.

Analysts said however that investors were reluctant to place strong bets ahead of a slew of U.S (Other OTC: UBGXF - news) . economic data this week, which could provide some hints about the timing of a U.S. interest rate hike. Wednesday's ADP employment data is the big focus ahead of Friday's non-farm payrolls figures.

"No doubt with the Fed's willing to pull the trigger, should the U.S. economy show signs of further strengthening ... any economic data or indicator will be closely scrutinised by traders," City of London Markets trader Markus Huber said.

However, mining stocks were on the back foot, with the European sector index falling 1.1 percent, tracking weaker metals prices. Shares (Berlin: DI6.BE - news) in Anglo American (LSE: AAL.L - news) , Fresnillo (Other OTC: FNLPF - news) , BHP Billiton (NYSE: BBL - news) and Rio Tinto (LSE: RIO.L - news) fell between 1.5 percent and 2.4 percent.

Shares in Iliad (LSE: 0MGY.L - news) rose 4.3 percent after the French telecoms operator said its core operating profit rose 11.5 percent from a year ago and it continued to win customers in both the mobile and broadband businesses.

On the downside, Grafton fell 6.4 percent to be the worst performer in the STOXX 600 after the distributor of building materials reported its first-half results and said that UK demand was relatively flat since the Brexit vote. (Editing by Louise Ireland)