* FTSEurofirst 300 up 1.7 pct, highest close since Oct. 2008
* Banks extend gains
* Nestle rises on UBS upgrade, Daimler on earnings numbers
By Brian Gorman
LONDON, Oct 19 (Reuters) - European shares hit a fresh 12-month closing high on Monday on increasing optimism for the third-quarter corporate earnings season, and with food group Nestle rising after a broker upgrade.
The FTSEurofirst 300 index of leading European shares rose 1.7 percent to 1,026.46 points, its highest close since Oct. 3, 2008.
The index is up 59 percent from its lifetime low hit on March 9, as investors have become more confident on the prospects of economic recovery and as companies such as JPMorgan Chase and Intel beat Wall Street expectations.
Up to and including Oct. 16, 61 companies in the S&P 500 Index have reported Q3 earnings, of which 79 percent topped analyst expectations, according to Thomson Reuters data.
Investors were looking ahead to results from Apple, due after the close of the U.S. market.
"I don't think anybody would dispute that a recovery is underway," said Mike Lenhoff, chief strategist and head of research at Brewin Dolphin Securities in London.
"The only issue is whether it's going to be sustainable or not. The number of companies beating estimates in their earnings, and also the number beating top line (revenue) forecasts suggest it will be."
Nestle, the world's biggest food company, gained 3.5 percent after UBS upgraded the stock to "buy" from "neutral" and increased its price target to 50 Swiss francs from 43 francs.
UBS said Nestle is benefitting from the rising stock of eye care company Alcon, in which Nestle is selling a stake to Swiss pharmaceuticals company Novartis.
AUTOS RISE
Meanwhile, German carmaker Daimler rose 7 percent after unexpectedly publishing key quarterly earnings figures, which showed a strong cash cushion.
Other carmakers to rise included BMW, Peugeot, Porsche, Renault and Volkswagen, up between 2.9 and 4.3 percent.
But the surge for European stocks was widepsread, with almost every sector rising. Banks, which are up more than 176 percent from the March lows, added most points to the index.
BNP Paribas, Banco Santander, HSBC and Societe Generale rose between 2.1 and 3.4 percent.
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC-40 closed between 1.7 and 1.9 percent higher.
Wall Street was higher as European bourses were closing. The Dow Jones, S&P 500 and Nasdaq Composite were up between 0.6 and 0.9 percent.
Crude oil rose to just under $79 a barrel, near its highest in a year, boosting energy shares.
Total, BP, Statoil and Royal Dutch Shell rose between 1.3 and 2.7 percent.
Frankfurt stock exchange operator Deutsche Boerse rose 6.3 percent, helped by a report in Crain's Chicago Business that CME Group, the world's largest derivatives exchange, is in talks to take over the Chicago Board Options Exchange.
In macroeconomic news, U.S. Federal Reserve Chairman Ben Bernanke sounded a note of caution. He warned that Asian policies promoting exports could lead to a reemergence of imbalances in trade and capital flows, which some believe helped fuel the U.S. housing bubble. (Additional reporting by Atul Prakash; Editing by David Holmes)