* STOXX, euro zone blue chips gain
* Richemont lower after profit miss
* Drillisch, Havas rally after bids
* European equity funds see record inflows
* Credit Suisse cuts Spanish stocks to underperform
* Greek stocks snap historic winning streak (ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon, see cpurl://apps.cp./cms/?pageId=livemarkets)
By Danilo Masoni and Helen Reid
LONDON/MILAN, May 12 (Reuters) - European shares enjoyed a third straight week of gains on Friday, lifted by dealmaking among telecoms and strong company trading updates, as flows into European equities reached record levels.
Results in Europe have been surprisingly strong with 67 percent of companies beating earnings expectations.
Combined with easing political worries that have attracted a wave of capital, especially from the United States, strong earnings have helped the pan-European STOXX 600 hit 21-month highs earlier in the week.
European equity funds pulled in record flows in the week following the second-round of the French presidential election, with more than $6 billion pumped into the region while U.S. equity funds had $2 billion of outflows, according to Citi and fund tracker EPFR Global.
"U.S. investors have seen the economic data, they look at the euro and see it's an undervalued currency, and they have started to move some money out of the U.S. and into Europe," said Stephen Mitchell, head of global equities at Jupiter, adding American investors are feeling 'fatigue' about their home market.
The STOXX and euro zone blue chips were both up 0.2 percent, while the UK's FTSE 100 added 0.5 percent, boosted by a 9 percent surge in AstraZeneca following positive trial results from a key immunotherapy drug.
Gains in the British drugmaker helped lift Europe's healthcare index up 1.8 percent, making it one of the biggest contributors to the STOXX.
Fresh dealmaking activity in telecoms drove the sector up 2.4 percent to its highest level in 11 months.
United Internet surged 14 percent after saying that it planned to buy a majority stake in mobile operator Drillisch in a deal which will boost competition at the low end of the crowded German telecoms market.
Drillisch soared above the bid price. Alpha Trading portfolio manager Stefan De Schutter said that reflected the fact that Drillisch will pay a dividend before the bid as well as the chance that United may increase the stake in the future.
German telecoms Deutsche Telekom and Telefonica Deutschland rose 4.9 and 6 percent, respectively.
Petrofac led European fallers, plummeting 14 percent after the oil services firm said its chief executive and chief operating officer had been questioned by Britain's Serious Fraud Office in connection with an ongoing investigation into Unaoil.
Cartier owner Richemont fell 5 percent after saying the trading environment would stay volatile after net profit fell below expectations but sales growth picked up towards the end of its fiscal year to March.
Havas soared 9.2 percent after Vivendi announced an offer to buy Group Bollore's 60 percent stake in the French advertising group in a $2.6 billion deal.
Schibsted rose 7.5 percent after revenues at the Norwegian media firm kept its guidance and posted revenues above analyst expectations.
Italian lender Banco BPM rallied 6.2 percent after its quarterly net profit came in well above expectations.
Banco Popular fell 3 percent after the struggling Spanish lender denied it was urgently seeking to be taken over. The stock was the biggest faller in Madrid on Thursday when the IBEX suffered its biggest one-day loss in six months.
Credit Suisse downgraded Spanish equities to underperform on Friday, citing fading earnings momentum and recommending clients take profits.
Despite suffering its worst week since November, Spain's IBEX kept its leading position among major European benchmarks this year, with year-to-date gains of 16 percent.
Meanwhile in Athens, the benchmark of Greek stocks fell 1 percent, snapping a 13-day winning streak which was its longest since 1991.
Cyber attacks in Spain and the UK targeting companies and hospitals emerged late on Friday. Breaches in cyber-security have wiped billions off companies' share prices since 2013, a report found last month. (Reporting by Danilo Masoni; Editing by Elaine Hardcastle)