European shares hit 13-mth high on ECB action hopes

Euro zone banks soared 2.7% and yields on benchmark Italian and Spanish bonds fell further as investors continued to speculate the ECB would intervene on the debt market to reduce borrowing costs for struggling countries.

The falling bond yields helped Italy's FTSE MIB climb 2.4% and outperform all other western European national indexes, led by heavyweight financials including UniCredit , big holders of the country's debt.

"There are many uncertainties but, still, the ECB is going to take a more active role concerning the debt crisis in Europe," Matthias Thiel, a capital markets strategist at M.M Warburg & CO in Hamburg.

"With the action of the ECB, (a euro zone break-up) is getting more unlikely. That means there is some potential that equity markets, in southern Europe especially, are going to rally further."

The FTSEurofirst 300 provisionally closed up 0.5%, at 1,110,77 points and has risen around 9% since the ECB's chairman, Mario Draghi, said late last month the central bank was prepared to do "whatever it takes" to save the euro.