European shares hold steady, medium-term uptrend intact
* FTSEurofirst 300 index steady near two-week low
* ARM Holdings slips on downgrade, tech shares fall
* Hennes & Mauritz up on lower-than-expected sales drop
LONDON, Jan 15 (Reuters) - European shares steadied on Tuesday after falling for three straight sessions and touching a two-week low, with tech stock losses offsetting gains for retailers after a sales update from Hennes & Mauritz.
Shares in the world's second-biggest fashion retailer advanced 3.8 percent after it reported a 2 percent drop in December sales at stores open a year or more. The mean forecast in a Reuters poll had been for a 4 percent drop.
The European retail sector index was the top gainer, adding 0.7 percent by 1122 GMT, while the FTSEurofirst 300 index was flat at 1,159.98 points after touching 1,156.75, the lowest since Jan. 2. The index, which hit a 22-month high earlier this month, has risen 22 percent from a June low.
"We are quite positive for risk assets in 2013 as we are seeing a better environment for global growth," said Oliver Wallin, investment director at Octopus Investments, which manages about $4.8 billion.
"It's possible the market got over-excited in the wake of the U.S. fiscal cliff agreement and might pull back a little bit over the short term. But our anticipation is that these kind of dips are going to be shallow and short-lived and would provide opportunities to buy stocks at more attractive price points."
Analysts said fourth-quarter earnings could provide the near term direction to the market, which is looking for fresh catalysts to scale new highs.
"We had a very strong run since November. The market appears a bit toppy now and is looking for new triggers to move ... higher. That could be coming from company results in the coming days," said Frank Bonsee, equity sales trader at ABN Amro.
Major U.S. companies announcing results this week included heavyweights such as Goldman Sachs, JPMorgan Chase , Bank of America, Citigroup and Intel announcing their results. European earnings will gather pace later this month.
Analysts said investors were cautious in placing strong bets as several issues still remained in the background and could flare up any time.
"The market still faces a lot of uncertainties. Investors will keep a close eye on Italian elections, while U.S. debt ceiling negotiations would also be in focus," Keith Bowman, equity analyst at Hargreaves Lansdown, said.
Federal Reserve Chairman Ben Bernanke urged U.S. lawmakers on Monday to lift the country's borrowing limit to avoid a potentially disastrous debt default, warning that the economy was still at risk from political gridlock over the deficit.
The euro zone's blue chip Euro STOXX 50 index was down 0.1 percent at 2,711.93 points and charts suggested that the weakness could continue in the near-term.
"The index looks somewhat sluggish ... For the very short term, there could be some pressure on the index to close the gap created early this month. This would be a normal pull back in an uptrend," said Roelof-Jan van den Akker, senior technical analyst at ING Commercial Banking.
Analysts said the market's medium-term bullish trend remained intact but major indexes and companies could witness choppy moves in the near term based on new headlines.
Chip designer ARM Holdings, down 4.3 percent, was the biggest decliner. The index dragged down the European technology index, the top sectoral decliner in Europe and down 0.8 percent.
"A downgrade by Morgan Stanley is the biggest issue for ARM this morning. It's reacting to Apple's share movement as well," Bonsee said, referring to recent reports that Apple had cut orders for LCD screens and other parts for the iPhone 5 this quarter due to weak demand. Apple fell 3.6 percent on Monday.
Morgan Stanley said in a note that while it remained very impressed by ARM and its partners' progress, it believed the current absolute share price was not attractive enough for new money. It downgraded the share to "equal-weight.
On the upside, Burberry Group rose 4.1 percent as the British luxury brand posted a 9 percent rise in third-quarter underlying revenue, prompting BofA Merrill Lynch to upgrade its rating to 'buy' from 'neutral'. ID:nASN0001F4 3/8