* FTSEurofirst 300 up 0.3 pct, after 16 pct gain in Q1
* Spanish, Italian shares hit highest since 2010 after PMIs
* Barry Callebaut up 6.6 pct after posting strong results (Updates with closing prices)
By Alistair Smout
LONDON, April 1 (Reuters) - European shares began the quarter with gains on Wednesday, after data showed manufacturing activity across the euro zone accelerated faster than previously estimated last month.
Markit's final March manufacturing Purchasing Managers' Index (PMI) reached a 10-month high of 52.2, beating a preliminary reading of 51.9 to provide another sign the bloc's economy is recovering.
The bullish PMI readings helped Spain's IBEX rise 0.6 percent and Italy's FTSE MIB gain 1 percent. Each touched its highest level since 2010.
Banks were the biggest winners, with the STOXX Europe 600 banks sub-index up 1.1 percent. Spanish banks Popular , Banco de Sabadell and Bankia rose 2.8 to 1.6 percent.
"Spain in general looks rather good, and recent data been coming in better than expected," said Markus Huber, sales trader at Peregrine & Black. "Banks look increasingly attractive, because they have a lot of catching up to do."
France's Credit Agricole rose 3.1 percent, hitting its highest level since November 2009 to take gains this year to more than 30 percent, after Deutsche Bank raised its target price on the stock.
At the close, the FTSEurofirst 300 index of top European shares was up 0.3 percent at 1,589.87 points.
The benchmark index surged 16 percent in the first quarter as the European Central Bank pumped out money and the euro weakened. Wednesday's PMIs contributed to the picture of a strengthening economy.
"The improving economic outlook, for example today's stronger PMI data, coupled with lower input costs (particularly energy costs) and higher overseas earnings thanks to the weaker euro, will drive an earnings upgrade cycle," said Neil Wilkinson, European fund manager at Royal London Asset Management, said.
Italy's online fashion retailer Yoox rose 9.5 percent after various banks raised their target prices following reports of a merger deal with Net-A-Porter. The stock has risen nearly 34 percent this week since Reuters reported the retailers were in talks.
Shares in Swiss chocolate maker Barry Callebaut surged 6.6 percent after it reported higher half-year sales and profits, as cost cuts helped counter the impact of the surging Swiss franc. It also confirmed its mid-term targets, subject to currency swings.
Neopost bucked the trend, dropping 6.8 percent after posting disappointing results.
The FTSEurofirst 300's biggest decline was by Fortum . Its shares fell 6.7 percent as it traded "ex-dividend" without entitlement to the latest payout and was also cut to "underperform" from "neutral" by Macquarie.
Europe bourses in 2015: link.reuters.com/pap87v
Asset performance in 2015: link.reuters.com/gap87v
Today's European research round-up (Editing by Larry King)