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Europe shares extend recovery, gains capped


* FTSEurofirst 300 up 0.4 pct, Euro STOXX 50 up 0.1 pct * Euro STOXX 50 capped by 50-day moving average * Cholet Dupont strategist recommends buying on dips By Blaise Robinson PARIS, Feb 6 (Reuters) - European stocks rose in early trade on Wednesday, extending the previous session's recovery with an upbeat outlook from ArcelorMittal reassuring investors. Shares in the world's largest steelmaker gained 2.3 percent, bouncing back from a recent 10 percent slide after the company forecast improved demand and earnings in 2013. At 0940 GMT, the FTSEurofirst 300 index of top European shares was up 0.4 percent at 1,159.33 points. The euro zone's Euro STOXX 50 index was up 0.1 percent at 2,652.97 points, extending Tuesday's gains but capped by strong resistance at 2,660 points. The STOXX 50 had suffered a 3.1 percent sell-off on Monday, sparked by worries over a corruption scandal in Spain and polls showing Italy's former prime minister Silvio Berlusconi regaining ground before elections this month. Analysts said they expected political concerns to continue to weigh though shares as an asset class looked set to remain in demand - likely making for a volatile market. "Now that the systemic risks (to the euro zone) are contained, the correction phases should be less violent than in 2011 and 2012," Cholet Dupont strategist Vincent Guenzi said. "We recommend taking advantage of these pull-backs to boost exposure to equities in portfolios. The equity market will continue to rise by phases, with a growing appetite for the asset class from investors." Cholet Dupont is 'overweight' European equities, seen as lagging U.S. stocks. Around Europe, Britain's FTSE 100 index was up 0.4 percent, Germany's DAX index up 0.2 percent and France's CAC 40 up 0.1 percent. French group Vinci featured among the top fallers, down 2.3 percent after warning of a flat year for its construction and concessions businesses. Dutch telecom group KPN fell 3.8 percent, adding to Tuesday's 16 percent plunge triggered by the company's plan to launch a rights issue to reduce its debt load and protect its credit rating. Shares in miners and steelmakers gained ground, buoyed by ArcelorMittal's outlook as well as by rallying metal prices, with London copper futures trading near four-month highs. Salzgitter was up 2.6 percent and Lonmin up 2.9 percent. The Euro STOXX 50 was capped by strong resistance at the index's 50-day moving average of 2,660 points. Failing to move back above the level in the next few days would send a negative technical signal, chartists said. "Monday was a warning that things aren't that rosy, with lots of macro and political risks out there. European indexes might have hit their peak for the next six months," Montaigne Capital fund manager Arnaud Scarpaci said. "The potential for a further rise in volatility is extremely high. The best thing to do is intraday trading in Europe, or buy U.S. stocks, which are set to benefit from a better macro environment."