* Euro STOXX 50 up 1.1 pct, bounces after 2-day drop
* Buyout offer sends Club Med jumping 22 pct
* Equities continue to attract strong inflows -EPFR
PARIS, May 27 (Reuters) - European shares rose on Monday,
rebounding after a two-day drop, with Fiat rallying on
speculation the Italian carmaker could soon launch a buyout
offer for its U.S. unit Chrysler.
Trading volumes were thin, however, as both the UK and U.S.
markets remained closed for a public holiday.
The Euro STOXX 50 index gained 1.1 percent, at
2,795 points, after suffering a 2.5 percent drop in two days.
Volumes on the euro zone's blue-chip index represented only 40
percent of its daily average volume of the past three months.
"We shouldn't read too much into today's rise, and I think
the pull-back started last week is not over yet," Saxo Banque
senior sales trader Alexandre Baradez said.
"However, the medium-term trend is still positive for
European stocks, with no big negative catalyst ahead, and with
very low bond yields driving more and more investors into
Euro zone banks featured among the biggest gainers,
bouncing back after a 5.6 percent slide last week, with both BNP
Paribas and Banco Santander up 2 percent.
Fiat gained 4.4 percent, boosted by a press report saying
the Italian carmaker is in talks with banks to secure financing
for a buyout of U.S. unit Chrysler.
Club Med jumped 23 percent after the French
holiday resort operator's top shareholders, AXA Private Equity
and Chinese investor Fosun International,
unveiled a buyout offer.
Swiss watchmakers Richemont and Swatch Group
added 0.5 percent and 1.1 percent respectively,
rallying after Chinese authorities said import duties on Swiss
watches will be trimmed by 60 percent over the next 10 years.
Around Europe, Germany's DAX index rose 0.9
percent, France's CAC 40 added 1 percent, Italy's FTSE
MIB rose 1.6 percent and Spain's IBEX climbed
European shares have strongly rallied since mid-April,
boosted by massive liquidity measures provided by central banks.
Equities saw further inflows last week, according to EPFR
Global, with equity funds world-wide seeing $7.49 billion of net
"A lot of investors who have the impression that they've
missed the rally of the past 10 months are coming in, which is
why we're seeing strong inflows continuing," said Edwin Lugo,
head of the Franklin European small-mid cap growth fund.
"But at this point, equities in Asia ex-Japan are very
expensive, and U.S. stocks are getting expensive, while Europe
is still the cheapest market. Despite the rally started last
July, the best opportunities are still in Europe."