European Shares Drift Higher

European shares edged higher on Monday, propped up by technology stocks after an upgrade, though the small addition to last week's rise was expected to be curbed by technical factors.

At 0845 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,127.37 points, after rising 3.3 percent last week, the biggest weekly gain since September.

Telecom equipment firms Nokia and Alcatel-Lucent rose 2.4 and 4 percent respectively after Goldman Sachs upgraded its investment rating on both shares to "buy" from "neutral".

Technical analysts said that further upside for the FTSEurofirst 300 could be limited. At around the 1,145 level, the index faces three potential resistance areas: the 61.8 percent point in the retracement of its fall from a March low, a test of the 50-day moving average and the long-term uptrend.

"Where you have triple convergence of potential resistance points in one slot, it does raise questions, and I don't think the index will breach it in the short term," said Bill McNamara, technical analyst at Charles Stanley. "

Investors remained worried about the overall picture in the Middle East as hostilities in Libya continued and Syria's President Bashar al-Assad deployed the army in Syria's main port of Latakia. [ID:nLDE72Q0C3] Japan's nuclear crisis also remains a key factor affecting risk appetite. "We had a nice bounce last week. Markets have been resilient in the face of some hideous news," said Justin Urquhart Stewart, director at Seven Investment Management. "All it would take is fear of another area of concern in the Middle East to knock the market back down. And Portugal's crisis hasn't gone away."

Chancellor Angela Merkel's conservatives lost power in a regional stronghold on Sunday, with early poll results showing the Greens, buoyed by Japan's nuclear crisis, surging to their first state premiership. "It raises concern how strong she's going to be over the next few years," said Urquhart Stewart.

Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC40 rose between 0.3 and 0.4 percent. Portugal's benchmark PSI rose 0.5 percent.

AUTOS FALL

Debt-laden German carmaker Porsche SE fell 3.2 percent after approving an almost 5 billion euro ($7 billion) capital increase, clearing the way for a merger with Volkswagen.

Others in the sector to fall included Daimler, and Renault, down 1.2 and 0.7 percent respectively down 0.7 percent.

The auto sector is also seen as being hit by the Middle East tension boosting oil prices, with Brent crude LCOc1 at around $115, only slightly below last week's highs.

Further, Deutsche Securities slashed its forecast for Toyota Motor Corp's operating profit by 84 percent for the next business year, underscoring the severity of the impact of a historic earthquake that has ground Japanese auto production to a virtual halt.

AstraZeneca rose 1.2 percent after the British and U.S. tax authorities have reached an agreement over the drugmaker's tax affairs that will boost its earnings per share in 2011. [ID:nLDE72R06F]

Data due late this week includes the U.S. non-farm payrolls.