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* FTSEurofirst 300 index rises 0.4 percent
* Encouraging Alcoa results boost sentiment
* Charts signal Euro Stoxx 50 aiming 2,735
By Atul Prakash
LONDON, Jan 9 (Reuters) - European shares climbed towards a new 22-month high on Wednesday after an encouraging start to the fourth quarter earnings season buoyed investor sentiment.
Alcoa, the largest aluminum producer in the United States, said late on Tuesday it was optimistic demand for the metal would continue to grow in 2013. Its profits were in line with expectations and revenues exceeded them.
"Expectations are quite low going into the earnings season as we saw a lot of downward guidance in the past few months. There is potential for an upside surprise to come through," Robert Parkes, equity strategist at HSBC Securities, said.
"We think earnings will grow by about 6 percent in Europe this year. We have got some topline growth coming through and a little bit of margin expansions."
At 0901 GMT, the FTSEurofirst 300 index of top European shares was up 0.4 percent at 1,164.46 points, after falling in the previous two sessions. The index touched a 22-month high this week and is up more than 22 percent since a multi-month low in June 2012.
The euro zone's blue chip Euro STOXX 50 index advanced 0.5 percent to 2,705 points, with charts suggesting the index would target 2,735 and 2,765, its highs in July 2011.
Cyclical sectors more linked to economic growth were in demand, with the STOXX Europe 600 telecoms index rising 1.5 percent and the banking sector index gaining 1.4 percent. Lloyds Banking Group rose 4 percent following a rating upgrade by UBS.
UBS also said in a strategy note that "risk-on" flows had returned, with investors favouring cyclical stocks such as miners. Its client flow activity in December showed the largest buying of peripheral European equities, such as Spanish and Italian stocks, since March 2012.
Some analysts said they liked sectors and companies with value and growth characteristics, such as financials which were still cheaper and offered a lot of value at current levels.
According to Thomson Reuters Datastream, European banks traded on 9 times their one-year forward earnings, against a 10-year average of 9.7 times and below 11.4 times for the pan-European STOXX Europe 600 index.
Among individual movers, J Sainsbury fell 2.5 percent. Britain's No. 3 supermarket met forecasts for underlying sales in the Christmas quarter, though growth did slow from its first half in a highly competitive festive market.