UPDATE 2-Italy leads bounce in European shares, Fiat-Renault talks in focus

* Italy's FTSE MIB rebounds after sharp losses
* Eyes on Fed minutes, Jackson Hole meeting for rate outlook
* Automakers rally on Fiat-Renault deal hopes

(Adds details, changes comments; updates to close)
By Agamoni Ghosh
Aug 21 (Reuters) - European stock markets ended at a
two-week high on Wednesday, led by a rebound in Italian shares
and as investors bet more concrete signals of stimulus from
central bankers may help allay global slowdown fears.
The pan-European STOXX 600 index .STOXX ended 1.2% higher
with Milan's blue-chip index .FTMIB rising 1.8%, bouncing back
from a political crisis-driven sell-off.
The resignation of Italian prime minister Giuseppe Conte on
Tuesday, had made investors nervous about Rome's continuing lack
of political stability, but also signaled that a new coalition
arrangement may be in works. Italy's main opposition party, Democratic Party (PD), said
on Wednesday it was ready to hold talks with the
anti-establishment 5-Star Movement over forming a government
following the collapse of the previous, populist coalition.

"The new majority would be considered a relatively more
positive outcome for market sentiment compared to snap
elections," said ING analysts in a note.
On the corporate front, auto stocks .SXAP got a boost from
reported merger talks between Fiat Chrysler .FCHA.MI and
Renault RENA.PA .
Italian newspaper Il Sole 24 Ore reported that talks between
the French and Italian-American car makers may be back on the
table, after a proposed multi-billion dollar merger, that was
set to create the world's third-largest auto company, collapsed
in June.
The European auto sector has been hit by a global auto
slowdown with car sales plunging as the sector battles with the
transition to electric and other alternative-fuel vehicles.
"This is a great example of two companies getting together,
saying that the environment is changing and we have to adapt
It's a continuation of a consolidation in the sector to survive
in a changing environment," said CMC Markets analyst David
Madden.
Among individual stocks, Pandora A/S PNDORA.CO shares
rallied for a second straight session, up 16%, with Wednesday's
move attributed by traders to a reported purchase of 24,400
shares by Chief Financial Officer Anders Boyer.
Interest-rate sensitive banks .SX7P made the smallest
gains with lender-heavy Madrid stocks .IBEX lagging regional
peers.
All eyes will be on the U.S. Federal Reserve's Jackson Hole
Symposium starting Thursday, where investors hope central
bankers including Fed Chair Jerome Powell will tread a dovish
tone.
Signs that governments and central banks are ready to step
in with additional measure to boost cooling global growth have
helped stock markets survive a volatile few weeks, but the
pan-Europe STOXX 600 is still on course to end August lower.