Italy and Spain outperform as European shares extend rally

* FTSEurofirst 300 up 0.2 pct, Euro STOXX 50 up 0.1 pct

* Volumes low as public holiday in most of Europe

* Gecina (Paris: FR0010040865 - news) drops as Metrovacesa sells stake

By Blaise Robinson

PARIS, June 9 (Reuters) - The Italian and Spanish stock markets slightly outperformed on Monday, as European shares built on last week's rally to leave key regional indexes hovering near multi-year highs.

Italy's FTSE MIB equity index rose 0.2 percent while Spain's IBEX advanced 0.4 percent, beating a 0.1 percent rise on Germany's DAX, as investors stepped up bets that southern European markets would benefit most from the European Central Bank's economic stimulus measures last week.

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, sparking a rally in European equities.

The Italian and Spanish markets are more heavily weighted towards "cyclical" stocks such as banks, which often outperform in a strengthening economic cycle, than other European markets.

Luca Paolini, chief strategist at Pictet Asset Management, said he would favour such "cyclical" equity sectors for now, while Saxo Banque trader Pierre Martin said the trend for European stock markets remained positive.

"A lot of indexes have crossed above key resistance levels last week, and the positive trend continues," said Martin.

"Overall, it's a great scenario for equities: very low interest rates, very low inflation, and the U.S. and European economies in recovery mode," he added.

GECINA FALLS

The pan-European FTSEurofirst 300 index rose by 0.2 percent to 1,391.36 points, its highest level since early 2008.

The euro zone's blue-chip Euro STOXX 50 index also advanced by 0.1 percent to 3,297.54 points, having earlier hit a near six-year high of 3,302.77 points.

Trading volumes were thin due to a public holiday in a number of countries including Germany and France, although stock markets remained open across the region, apart from a few countries including Switzerland, Austria and Greece.

Shares in France's Gecina dropped 3.2 percent after Spanish builder Metrovacesa said it agreed to sell its 27 percent stake in the firm at a discount.

"Considering that the deal seems to be at the same price level as several months ago, and that it is not an attractive price for Metrovacesa, it is likely that the Spanish company is in a hurry to get fresh cash for its refinancing," Societe Generale analysts wrote in a note.

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

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

Today's European research round-up (additional reporting by Sudip Kar-Gupta; Editing by Toby Chopra and Louise Heavens)