UPDATE 1-European shares rise as sentiment improves, Italian banks rally

* STOXX 600 up 0.8 pct

* Italian banks rally on landmark bad loan deal

* AB Foods and Casino rise on financial results (Adds detail and closing prices)

LONDON, April 17 (Reuters) - European shares rose on Tuesday to their highest since the end of February as sentiment on tensions between the U.S. and Russia eased and attention shifted to deal-making and first-quarter earnings season.

The pan-regional STOXX 600 .STOXX index rose 0.8 percent, while other European benchmarks also rose, boosted in afternoon trading by strong gains on Wall Street. in the day, however, data from China gave a mixed picture of the country's economic health. Growth hit 6.8 percent in the first quarter but separate figures showed March industrial output missed expectations. a calming of geopolitical concerns and optimism about the Q1 earnings season, mixed data from China may revive queries about the strength of the world's No. 2 economy," Accendo Markets analysts Mike van Dulken and Artjom Hatsaturjants told clients.

Italian banks rallied, up 1.7 percent after the country's biggest lender, Intesa Sanpaolo ISP.MI , agreed a sale of bad loans that investors said could help other banks to achieve better terms and boost lending. have now finally turned the corner on the aggregate amount of NPL (non-performaing loan) exposure in Italy," said Pierre Bose, head of European strategy at Credit Suisse (SIX: CSGN ) Wealth Management.

Shares in Sweden's Intrum Justitia INTRUM.ST , which bought Intesa's loans, rose 8 percent.

Elsewhere, AB Foods ABF.L advanced by 4.1 percent after meeting results expectations with a resilient performance at its Primark fashion business and a previously flagged reduction in sugar revenues. CASP.PA rose 1.3 percent after the French supermarket chain reported a 3.1 percent rise in first-quarter sales that reflected stronger performance in its Geant Casino hypermarkets and in Brazil despite food inflation. SASY.PA firmed by 0.6 percent after the French healthcare group announced exclusive talks to sell its Zentiva European generics drugs arm to private equity firm Advent Internationalfor 1.9 billion euros ($2.4 billion). on the French M&A front, Lagardere LAGA.PA , the French media group with assets including Paris Match magazine and Europe 1 radio, rose 1.2 percent after it said it would sell some eastern European radio assets to Czech Media Invest.