* FTSEurofirst 300 up 0.7 pct, halts 3-week retreat
* 'Oversold' banking stocks bounce back
* Carrefour drops 9 pct after cutting profit forecast
* For up-to-the-minute market news, click on []
By Blaise Robinson
PARIS, Dec 1 (Reuters) - European stocks rose in early trade
on Wednesday, halting a three-week sell-off as strong Chinese
manufacturing data lifted sentiment on global growth and
eclipsed nagging concerns over the euro zone debt crisis.
The gains where limited, however, by weaknesses in the food
and retail sector after world No.2 retailer Carrefour <CARR.PA>
cut its 2010 profit forecast, sending its shares down 9 percent
to a one-year low.
Rivals Ahold <AHLN.AS>, Sainsbury <SBRY.L> and Morrison
Supermarkets <MRW.L> lost 0.8 to 1.1 percent.
At 0932 GMT, the FTSEurofirst 300 <> index of top
European shares was up 0.7 percent at 1,074.64 points, while the
Euro STOXX 50 <> rose 0.9 percent, moving back above a
key support level, the 38.2 percent Fibonacci retracement of the
index's drop from an April high to a May low.
The euro zone blue-chip index's next big resistance level is
at 2,737.62, which represents the 50 percent retracement of the
April-May drop.
"We're getting a technical rebound. A number of indicators
showed the indexes as 'oversold', and some investors have
started looking for bargains. But we're keeping a close eye on
bond yield spreads to see if this stock rebound has legs," said
Harry Sebag, head of sales trading at Saxo Banque.
Investors seemed to take a breather from the euro zone debt
crisis, despite Standard & Poor's warning late on Tuesday that
it could cut Portugal's credit ratings. []
The premium investors demand to hold Spanish government
bonds was set for its largest decline in two weeks as core
German Bunds fell ahead of a sale and peripheral debt got some
respite from its recent battering.
Banco Santander <SAN.MC> gained 5.2 percent, Societe
Generale <SOGN.PA> rose 3 percent and BBVA <BBVA.MC> added 5
percent.
The STOXX banking sector index <.SX7P> is still down 15
percent since mid-September on fears that a deepening euro zone
debt crisis could force a state member to default, triggering
big writedowns for financial institutions.
But over the past few days, the sector index had fallen into
'oversold territory' for the first time since May, with its
relative strength index (RSI) hitting 25.7 on Tuesday. Thirty
and below is considered "oversold" territory.
Around Europe, UK's FTSE 100 index <> was up 1 percent,
Germany's DAX index <> up 1.2 percent, and France's CAC 40
<> up 0.7 percent.
Carmakers gained ground, with the STOXX auto index <.SXAP>
up 1.9 percent, helped by an upbeat Nomura note saying the
continent's market should be "back in the black in 2011".
Renault <RENA.PA> gained 2.3 percent and BMW <BMWG.DE> rose
1.9 percent. So far this year, the auto index has gained 41
percent, by far the best sector performance in Europe.
"Investors have been playing the theme 'buy cyclicals, sell
financials'. Banks are far from getting out of the woods, but
cyclicals are overheating, particularly the auto sector," said
Pierre Sabatier, strategist at Prime View, in Paris.
"We think it's best to turn to defensive stocks at this
point."
(Reporting by Blaise Robinson; Editing by Hans Peters)
