* FTSEurofirst 300 up 0.2 pct, Euro STOXX 50 up 0.4 pct
* Aviva slumps after dividend cut
* Aggreko and Carrefour rise after reassuring results
* ECB meeting due later in day
By Sudip Kar-Gupta
LONDON, March 7 (Reuters) - European shares crept higher on
Thursday although traders said further gains could be limited in
the near term on concerns over how the European Central Bank
would deal with Italy's political deadlock.
The pan-European FTSEurofirst 300 index, which had
reached a 4-1/2 year intraday high of 1,193.35 points on
Wednesday, was up by 0.2 percent at 1,188.09 points by around
The euro zone's blue-chip Euro STOXX 50 index
advanced 0.4 percent to 2,690.88 points, while Germany's DAX
rose 0.2 percent to 7,937.83 points, nearing five-year
highs reached earlier this week.
While investors said more gains were likely over the course
of the year, they said that in the nearer term, there was a risk
markets would be volatile due to uncertainty over how the ECB
would address Italy's problems at its meeting on Thursday.
Italy's elections last month produced a deadlock, which
reignited worries over how Italy and the likes of Spain could
continue with austerity measures to heal their debt-ridden
economies, given public anger to such tough economic reforms.
The ECB is expected to hold interest rates at a record low
of 0.75 percent but analysts say ECB head Mario Draghi will
reaffirm that there is no question of loosening the central
bank's rules on bond-buying to accommodate Italy.
MB Capital Trading Director Marcus Bullus said his firm was
advising clients to go into the ECB meeting on Thursday with a
"neutral" position - namely neither betting on major gains nor
on a major fall on equity markets as the ECB meeting progressed.
Bullus said investors wanted Draghi to reaffirm his support
for the euro zone's economy in light of the problems with Italy
but that it could be hard for Draghi to come up with concise
"He does need to address what is happening in Italy but I
don't see how he can do that in a positive light. Markets could
be very choppy as the ECB meeting progresses," said Bullus.
Analysts at ING added that some investors were hoping that
the ECB may cut rates, which could boost stocks, although they
felt this was unlikely.
"The appreciation of the euro exchange rate and new market
uncertainty after the Italian elections have given rise to new
speculation about a possible ECB rate cut ... However, in our
view, the ECB is still inclined to keep rates on hold," they
wrote in a note.
British power company Aggreko and French
supermarket retailer Carrefour led gainers on the
FTSEurofirst 300 after posting reassuring results, with Aggreko
rising 14.6 percent while Carrefour advanced 3.8 percent.
However, UK insurer Aviva slumped 12.8 percent after
slashing its dividend and the stock's fall was one of the
biggest drags on the FTSEurofirst 300.
"The markets have reacted with their feet today on the near
halving of the Aviva dividend as institutional investors looking
for solid income plays in this low-interest environment headed
for the exit," Edison Investment Research analyst Martyn King
wrote in a research note.
Lloyds TSB Private Banking's Ian Martin said that even
though there was the likelihood that equity markets could
experience a minor pull-back in the near-term, the longer-term
outlook remained a bullish one.
Martin said most investors expected the broader global
economy to strengthen, shrugging off any weakness in Europe, and
that investors were still looking to buy up shares on days when
the stock market fell.
"I don't anticipate a major pullback. When I talk to
investors, they're always looking to buy the market on the dip,"