European shares steady ahead of euro zone meeting

* FTSEurofirst 300 flat, hovers just below 7-year high

* France's PMI moves back above 50, German PMI also bullish

* Europe enjoying best earnings season in 3-1/2 years

* Valuation ratios hit highest since mid-2004

By Blaise Robinson

PARIS, Feb 20 (Reuters) - European shares were steady on Friday morning, with a benchmark index hovering just below a seven-year high, ahead of a meeting of euro zone finance ministers on Greece's bailout programme.

Shares (Frankfurt: DI6.F - news) in France's Gemalto (Other OTC: GTOFF - news) sank as much as 10 percent in massive volumes after the firm said it would investigate a report saying U.S. and British spies had hacked the digital security group to steal its encryption keys.

"If these attacks were to be confirmed and did allow access to various communications, it would be very damaging for Gemalto's reputation," a Paris-based trader said.

Shares in food giant Danone (LSE: 0KFX.L - news) dipped 1.2 percent after it made a cautious 2015 sales and profitability growth forecast, while Standard Life (LSE: SL.L - news) rose 2.4 percent after posting a 19 percent rise in operating profits.

French mining group Eramet (LSE: 0MGV.L - news) jumped 9.6 percent after posting better-than-expected results.

Half way into earnings season, results have been strong in Europe, with 53 percent of companies posting better-than-expected profits, according to Thomson Reuters I/B/E/S. Fourth-quarter earnings are expected to grow 19.5 percent, which would be the best quarter in 3-1/2 years.

At 0856 GMT, the FTSEurofirst 300 index of top European shares was down 0.01 percent at 1,520.11 points, hovering just below a seven-year high hit on Thursday.

The FTSEurofirst 300 has surged 11 percent so far this year, outpacing Wall Street's S&P 500, up 1.9 percent over the same period.

"The market continues its slow progression upward and there aren't any signals of weakness at this point. Every small pull-back is a buying opportunity," said Jean-Louis Cussac, head of Perceval Finance.

European stocks' sharp rally this year has propelled valuation ratios to levels not seen in nearly 11 years. The broad STOXX 600 index trades at 15.6 times earnings expected in the next 12 months, its highest P/E ratio since mid-2004.

Market sentiment was helped by data showing France's private sector has unexpectedly expanded at the fastest rate in 3-1/2 years this month. Markit (NasdaqGS: MRKT - news) 's preliminary composite purchasing managers' index jumped to 52.2 from 49.3 in January. It was highest reading since August 2011 and the first reading above the 50-point line denoting growth since last April.

Data for Germany also showed Europe's largest economy is on track for solid growth in the first quarter. Markit's flash composite Purchasing Managers' Index climbed to 54.3 in February, up from a final reading of 53.5 in January.

Greece was still at the forefront of investors' minds, ahead of a euro zone meeting. A Greek government spokesman said on Friday Greece has made every effort to reach a mutually beneficial agreement with its euro zone partners but will not be pushed to implement its old bailout programme.

Europe bourses in 2015: http://link.reuters.com/pap87v

Asset performance in 2015: http://link.reuters.com/gap87v

Today's European research round-up

(Editing by Alison Williams)