* FTSEurofirst 300 rises 0.2 percent
* Miners add to gains
* For the latest stock news, click on []
By Brian Gorman
LONDON, Oct 7 (Reuters) - European shares edged higher in
early trade on Wednesday, building on a major gain in the
previous session, with miners among the biggest risers.
At 0838 GMT, the FTSEurofirst 300 <> index of top
European shares was up 0.2 percent at 995.15 points.
Miners extended gains from Tuesday, as gold prices held near
record levels, above $1,000 an ounce, and copper also remained
relatively strong.
Anglo American <AAL.L>, BHP Billiton <BLT.L>, Rio Tinto
<RIO.L> and Xstrata <XTA.L> rose between 0.6 and 1 percent.
On Tuesday, the European benchmark rose 2.2 percent, its
biggest one-day percentage gain in nearly two months, and is up
more than 55 percent from its lifetime low of March 9, as
investors have become more confident on the prospects of economic
recovery.
Some analysts advised caution, arguing that much of the
recent surge in equities had been due to rises for commodity
shares, which had been fuelled by dollar weakness.
"Commodity demand isn't rising. Commodity prices are fooling
us, because you have the cloak of the dollar over them. Take off
the cloak and commodities will look weak," said Justin Urquhart
Stewart, director at Seven Investment Management. "It's fool's
gold. Growth will continue to be weak."
"But every time there's a dip, there are certain mangers
sitting on cash, desperate to get in. We could be in a trading
range."
The insurance sector was higher, benefitting from the rise
in equity markets worldwide. Aviva <AV.L>, AXA <AXAF.PA>,
Prudential <PRU.L> rose between 1 and 1.1 percent.
Energy companies were among the biggest fallers, after crude
<CLc1> pared gains late on Tuesday, though it is still above $71
a barrel.
Total <TOTF.PA>, BP <BP.L> and Royal Dutch Shell <RDSa.L>
fell between 0.4 and 0.8 percent.
Across Europe, Britain's FTSE 100 <>, Germany's DAX
<> and France's CAC-40 <> rose between 0.1 and 0.2
percent.
SAINSBURY FALLS
British supermarket group J Sainsbury <SBRY.L> fell 3.3
percent after meeting forecasts with a slight slowdown in
quarterly sales growth and saying that industry growth would
moderate further as food price inflation eases.[]
Water groups Pennon <PNN.L> and Severn Trent <SVT.L> rose
2.3 and 2.2 percent respectively after they were upgraded by
HSBC to "overweight" and "neutral" respectively.
Kingfisher <KGF.L> rose 3.5 percent. UBS upgraded its
recommendation on Europe's largest home improvement retailer to
"buy" from "neutral" and Morgan Stanley upped its stance to
"equal-weight" from "underweight".
Later, investors' attention will turn to the United States,
where Alcoa <AA> is due to kick off third-quarter earnings
season.
"In the third-quarter earnings, companies' top lines will
look weak, and the bottom line will look good," said Urquhart
Stewart. "That means they are cutting costs, peeling the bark
back. If you keep doing that, you kill the tree."
(Editing by Rupert Winchester)
