Telecoms boost European shares; gains seen capped

                                
   * FTSEurofirst 300 index finishes 0.3 percent higher
                                
 * Telecoms boosted by merger talks, upbeat broker note
                                
 * Greek banking stocks drop after Moody's downgrade 
                                
 
                                
 By Atul Prakash 
                                
 LONDON, March 8 (Reuters) - European shares ended higher on
Tuesday as a decline in crude oil prices eased concerns about
the pace of global economic recovery, though technicals suggest
short-term gains could be limited.
                                
 A jump in Deutsche Telekom <DTEGn.DE> on renewed talk that
the company and Sprint Nextel <S.N> may be in discussions to
combine their operations in the United States boosted telecom
shares. However, miners tracked a drop in key metals.
                                
 Greek shares <.ATG> fell 3.8 percent, while the banking
index <.FTATBNK> dropped 6.3 percent. National Bank <NBGr.AT>
and EFG Eurobank <EFGr.AT> fell 6.8 percent and 6.1 percent
respectively, a day after Moody's cut Greece's credit rating by
three notches, raising the spectre of a debt restructuring.
                                
 The FTSEurofirst 300 <.FTEU3> index of top shares closed 0.3
percent higher at 1,147.43 points, with volume at 103 percent of
the 90-day daily average. The euro zone's blue-chip Euro STOXX
50 index <.STOXX50E> rose 0.5 percent to 2,945.42 points.
                                
 Charts indicated the market's gains could be limited. The
STOXX 50 traded below its 50-day moving average of 2,948.15 and
hovered near the bottom of its short-term uptrend channel. 
                                
 "There are signals in place to suggest that the market has
reached a short-term top," said Bill McNamara, technical analyst
at Charles Stanley, who saw support at 2,880 and further at
2,800 -- the 61.8 percent Fibonacci retracement of the index's
drop from April to May last year.
                                
 "The jury is still out as to whether this is developing into
a corrective phase, but if a key level is taken out, then the
implication would be that a full-fledged correction is
underway," he said, referring to 2,836 as the key level.
                                
 Telecom shares were among the top gainers, helped by merger
talk and on an upbeat note from Morgan Stanley, which raised its
overall stance on telecoms services to "attractive", saying
downside risks in the sector were less pronounced, traders said.
                                
 The European telecom sector index <.SXKP> rose 1.9 percent,
with Deutsche Telekom advancing 4 percent. The stock's volume
was nearly 400 percent of the 90-day daily average.
                                
 
                                
 MINERS UNDER PRESSURE 
                                
 Miners topped the decliners' list as nickel prices fell more
than 2 percent, though copper recovered after earlier losses.
The STOXX Europe 600 Basic Materials index <.SXPP> was down 0.9
percent, while Antofagasta <ANTO.L> fell 2.7 percent.
                                
 Shares in west African-focused gold producer Randgold
Resources <RRS.L> declined 8.2 percent on investor concern that
violence in Ivory Coast could hit its operations there. Randgold
share volume was 350 percent of the 90-day daily average.
                                
 Investors kept an eye on crude, which could jump further on
unrest in the Arab world. In Libya, government troops, tanks and
warplanes attacked rebels, pressing their campaign to crush an
insurrection against Muammar Gaddafi. [ID:nLDE7271X6]
                                
 The FTSEurofirst 300 is down 4 percent since a 29-month high
on Feb. 18, while U.S. crude oil <CLc1> has gained more than 20
percent over the same period. OPEC was considering measures to
boost production to ease anxiety about a supply disruption in
Libya.
Lothar Mentel, chief investment officer at Octopus, said
although a 2011 oil price shock was a possibility, it was
unlikely.
                                
 "The political uncertainty has meant little change being
made to our asset allocation in the past couple of weeks ...
although portfolio activity has remained brisk, as a result of
investing in different funds within the same asset class," said
Mentel, whose fund company manages about $3.4 billion.
                                
 Some fund managers said that despite the sharp rise in
geopolitical risks, equities had not suffered a real correction
because of strong inflows into the asset class.
                                
 "Massive inflows into equities so far this quarter have been
really supportive for stocks," said Jean-Yves Dumont, head of
asset allocation strategy and funds at Dexia Asset Management,
which manages about 86 billion euros. "We're on track for the
strongest quarterly inflow since the first quarter of 2007." 
 (Additional reporting by Blaise Robinson in Paris; Editing by
David Holmes)