* FTSEurofirst 300 up 0.5 pct, Euro STOXX 50 up 0.6 pct
* Euro STOXX 50 halted by long-term descending trendline
* 200-day moving average turns upwards, seen as bullish sign
* Banks resume recovery, up 25 pct since Draghi's comments
By Blaise Robinson
PARIS, Aug 14 (Reuters) - European stocks rose in morning
trade on Tuesday, reversing the previous session's dip and
resuming their three-week rise as tepid growth figures from
Europe strengthened the case for further stimulus measures from
the region's policymakers.
At 1042 GMT, the FTSEurofirst 300 index of top
European shares was up 0.5 percent at 1,099.80 points, after
losing 0.4 percent in the previous session.
Data showed on Tuesday the euro zone economy contracted by
0.2 percent in the second quarter, while Germany eked out growth
of 0.3 percent but the country's forward-looking ZEW sentiment
index slid for a fourth month running, undercutting even the
lowest estimate in a Reuters poll.
"The data was broadly in line with what was expected, so not
much impact on the relatively good mood in equities, which seem
to have further room on the upside. If the rally of the past
three weeks was not justified, then we would have had a big
pull-back already," said Alexandre Baradez, senior sales trader
at Saxo Banque.
"The only thing that could hit sentiment now is if we get
negative headlines on the ESM (European Stability Mechanism) out
of nowhere. But all in all, the trend is positive and investors
who have missed the rally are getting nervous now."
Banking stocks featured among the top gainers, with Italy's
Intesa Sanpaolo up 1.4 percent, Spain's Banco Santander
up 0.8 percent and France's Natixis up 0.7
The euro zone bank index, which was up 0.8 percent
on the day, has shot up 25 percent since European Central Bank
President Mario Draghi said in late July the ECB was "ready to
do whatever it takes to preserve the euro", triggering
expectations of bold measures to help lower the borrowing costs
of debt-stricken Spain and Italy.
The euro zone's blue chip Euro STOXX 50 index
was up 0.6 percent on Tuesday, at 2,430.43 points, but was
halted for a sixth session in a row by a strong resistance
level, a long-term downward trendline formed by 2011 and 2012
highs, at about 2,437 points.
FLAG PATTERN, LOW VOLUMES
Charts show the blue chip index has been forming a 'flag'
over the past week, a technical charting pattern formed by
swings within a narrow range in a mild consolidation trend.
The flag, one of the most reliable 'continuation' patterns,
usually signals a pause in a rally with a drop in trading
volume, before the index resumes its uptrend.
Volumes on the index have sharply dropped over the past two
sessions to levels not seen since the holiday week in late
Volumes were extremely low again on Tuesday. By midday, the
volume on the index was a thin 17 percent of the 90-day daily
"Technically speaking, the trend has completely turned
positive. The 200-day moving average on the Euro STOXX 50 has
turned upward," said Riccardo Designori, financial analyst at
Brown Editore, in Milan.
"We might get a 5-6 percent consolidation this week or next,
but it won't change the broad picture. Buying the retracements
has been a great strategy lately."
Despite the recent recovery in euro zone stocks and the drop
in implied volatility, the Euro STOXX 50 remains the most
volatile of major indexes within developed markets, according to
Thomson Reuters data.
So far this year, the index has had 33 sessions where
intraday swings exceeded 2.5 percent, compared with only one
session for the S&P 500 and four for Tokyo's Nikkei