* FTSEurofirst 300 up 0.4 pct, hits new 7-year high
* Mining stocks track rally in metals prices
* Allianz drops as dividend hike disappoints
By Atul Prakash
LONDON, Feb 26 (Reuters) - European shares rose on Thursday as a rally in metals prices pushed basic resources stocks higher, sending the pan-European FTSEurofirst 300 to a new multi-year high and Germany’s DAX to a record peak.
The FTSEurofirst 300 advanced 0.4 percent to 1,548.03 points by 1200 GMT, its highest for seven years, and the DAX rose 0.3 percent to an all-time peak. The broader STOXX 600 was up 0.4 percent after hitting its highest level since 2007.
The STOXX Europe 600 Basic Resources index rose 1.6 percent, to be the top sectoral gainer, after copper hit a six-week high when Chinese trading resumed following a break. Zinc and aluminium both rose about 1.5 percent.
“Metals prices are stabilising and inducing a lot of investors to buy mining stocks. I am cautiously optimistic on the sector as things are looking better than they were a couple of months ago,” BNP Paribas Fortis Global Markets head of research in Brussels, Philippe Gijsels, said.
“I am bullish on European equities in the long run, but there is a risk of a sell-off in the near term as most of the indexes have become overbought. Equities could fall 5 to 7 percent in the next couple of months.”
According to Thomson Reuters charts, the FTSEurofirst 300’s 14-day relative strength index (RSI) rose to a 10-year peak of 78. A level above 70 for an index is seen technically overbought and often triggers profit taking.
Among sharp movers, Greek banks fell, dragged down by fears that the country will not be able to make debt repayments to the IMF and the European Central Bank this year.
Shares in National Bank of Greece, Alpha Bank , Bank of Piraeus and Eurobank were down between 1.3 and 3.8 percent.
Europe’s largest insurer Allianz fell 2 percent after it raised its dividend by less than expected and results in asset management stalled following client defections at its U.S. unit Pimco.
Belgian chemicals group Solvay rose 4.6 percent after saying it would pay out more to its shareholders following better-than-expected results.
About two thirds into Europe’s earnings season, 55 percent companies have met or beaten profit forecasts. Overall, fourth-quarter earnings are expected to increase by 19.5 percent, according to Thomson Reuters I/B/E/S, which would be Europe’s best season for 3-1/2 years. (Additional reporting by Blaise Robinson in Paris; Editing by Louise Ireland)