European shares gain on merger speculation
* FTSEurofirst 300 rises 1.1 percent
* Telecoms top gainers on M&A talk
* Indexes find support after sell-off
LONDON, June 17 (Reuters) - European equities rose for a second straight session on Monday, led by telecom shares after the sector was buoyed by merger and acquisition talk, and as stock indexes found strong support after recent falls.
The European telecoms index, up 2.2 percent, topped the gainers' list, helped by a 2.9 percent rise in Telefonica after a newspaper report that the Spanish government had blocked a 70 billion euro ($93.4 billion) tender offer from U.S. company AT&T.
Telefonica denied it had received any approach from its rival, but investors remained positive on the sector, which has seen a pick up in merger talks.
Vodafone, which has shown interest in cable operator Kabel Deutschland and witnessed speculation U.S. peer Verizon may look to buy full control of the Verizon Wireless venture, rose 2.7 percent.
"Momentum is building in the sector," said Daniel McCormack, strategist at Macquarie, referring to more merger and acquisition talks in the industry. He added that the market's focus would be on a policy meeting of the U.S. Federal Reserve on June 18-19.
The FTSEurofirst 300 index of top European shares fell 8 percent in three weeks from a 5-1/2-year high late last month following comments from Fed Chairman Ben Bernanke that it could begin trimming its stimulus in the next few meetings if the economy improves.
But mixed U.S. economic numbers have prompted some analysts to say the Fed might not trim its bond-buying operations anytime soon.
"Expectations had swung aggressively in a hawkish direction over the last couple of weeks. But there is definitely a bit of a shift going on in the market as people are anticipating somewhat dovish rhetoric from Bernanke," McCormack said.
At 1126 GMT, the FTSEurofirst 300 was up 1.1 percent at 1,188.74 points, while the euro zone's blue chip Euro STOXX 50 index was up 1.6 percent at 2,709.11 points.
Charts showed the Euro STOXX 50 found support after recent falls. It bounced after touching its 12-month uptrend line and a 200-day moving average, but is likely to face resistance at its 38.2 percent retracement from a rise from mid-April to late May.
"(These) support areas are holding, suggesting that the bull case for this index remains just about intact, and a push back above 2,700 would look promising on a short-term view," Bill McNamara, technical analyst at Charles Stanley, said.
Analysts were positive on the medium term outlook.
S&P Capital IQ Equity Research said in a note the current levels pointed to an attractive entry point for investors ahead of a predicted economic recovery in the second half of 2013.
It upgraded the autos and media sectors to "marketweight" from "underweight", and banks and industrial goods and services to "overweight" from "marketweight".