* FTSEurofirst 300 up 0.3 percent, up 5.6 percent in 3 days
* Index on track to post a weekly gain of 3.4 percent
* For up-to-the-minute market news, click on []
By Blaise Robinson
PARIS, May 28 (Reuters) - European stocks rose in early
trade on Friday, adding to a brisk two-day recovery rally as
investors continued to scoop up beaten-down shares while fears
over further sell-off of euro assets moved to the backburner.
Media shares featured among the top gainers, boosted by an
upbeat note from Citigroup on the sector, citing "decent value".
WPP <WPP.L> and Publicis <PUBP.PA>, both upgraded to 'hold' from
'sell' by Citi, gained 1 percent and 0.8 percent respectively.
At 0830 GMT, the FTSEurofirst 300 <> index of top
European shares was up 0.3 percent at 1,003.12 points, after
surging 5.3 percent over the past two sessions. The index is on
track to record a gain of 3.4 percent for the week.
Financial markets advanced on Thursday after China, the
world's largest foreign reserves holder, denied a news report
that it would review its holdings in euro assets.
Banks inched higher, extending their recent rebound, with
Societe Generale <SOGN.PA>, Banco Santander <SAN.MC> and UBS
<UBSN.VX> up 0.7-2.2 percent.
But Alexandre Le Drogoff, technical analyst at Aurel BGC,
warned that investors might be trying to "catch a falling
knife".
"This recovery rally could soon hit resistance on the
upside. This week's low point wasn't the capitulation point, so
the risk is still on the downside."
Europe's benchmark index is still down 9.7 percent since
mid-April, when fears that the Greek debt crisis could spread to
other euro zone countries, spark a credit crunch and derail the
global economic recovery started to intensify.
Risk appetite continued to recover on Friday, with the
VDAX-NEW volatility index <.V1XI> -- a gauge of investor risk
appetite or aversion -- hitting a two-week low.
The lower the volatility index, which is based on sell- and
buy options on Frankfurt's top-30 stocks <0#.GDAXI>, the higher
is investors' appetite for risky assets such as equities.
LOOKING FOR BARGAINS
In another sign that calm was returning to markets on
Friday, European credit derivative indexes tightened.
The investment-grade markit Itraxx Europe index <ITEEU5Y=MG>
was at 115 basis points, according to data from Markit. That is
2 bps tighter versus late on Thursday, according to data from
BGC Partners. The Markit iTraxx Crossover index <ITEXO5Y=MG>,
made up of 50 mostly "junk"-rated credits, was at 549 bps, 11
bps tighter.
Investors continued to look for bargains among stocks
following the six-week retreat that has pushed equity valuations
to their lowest levels in about 10 months.
"The market sell-off has left a number of stocks trading at
our bear-case estimates of value," Morgan Stanley strategists
wrote in a note.
Around Europe, UK's FTSE 100 index <> was up 0.6
percent, Germany's DAX index <> up 0.6 percent, and
France's CAC 40 <> up 0.4 percent.
Unilever <ULVR.L> rose 2 percent after UBS raised its rating
for the household products firm to 'buy' from 'neutral',
pointing out that the stock has significantly de-rated over the
last 6 months.
BP <BP.L> was down 2.4 percent. The company said on Friday
it still does not know whether its "top kill" operation designed
to plug the biggest oil spill in United States history will be
successful and puts the cost of tackling the disaster so far at
$930 million.
(Additional reporting by Natalie Harrison in London; Editing
by Mike Nesbit)
