* FTSEurofirst 300 up 0.1 percent
* Volvo drops after profit slump
By Tricia Wright
LONDON, Oct 24 (Reuters) - European shares inched higher on Wednesday, steadying after the previous session's sharp sell-off, as encouraging data out of China offset downbeat German economic numbers and earnings worries.
The HSBC Flash Manufacturing Purchasing Managers Index (PMI) for China climbed to a three-month high of 49.1 in October and new orders and output rose, pointing to an improvement in the economy. But the recovery is likely to be slow as the PMI stayed below the 50 market that separates expansion from contraction.
UBS took the view that China is nearing a trough in its cycle, and data should start to improve, which could trigger a rally in the medium term in mining shares - the biggest underperformers in Europe in the past three months.
"In basic resources we see initial relative strength coming in," Michael Riesner, head of equity technical analysis at UBS, said in a note.
"On a three-to-five month basis the mining sector remains our key long call since we continue to see China as a key trigger for the SXPP completing its major basing process."
The FTSEurofirst 300 was up 0.1 percent at 1,089.69 by 0910 GMT, having hit a session low of 1,084.44 following weaker-than-expected German Ifo and PMI data which fuelled concern about the resilience of the euro zone's biggest economy.
The index sank 1.7 percent on Tuesday.
Worries over corporate earnings were seen limiting any gains as third-quarter results continue to disappoint.
Volvo sank 5.1 percent, in heavy trading volume, after the world's number two truck maker posted a bigger-than-expected fall in third quarter earnings and forecast no growth in its key markets in 2013.
Volume stood at almost two times the 90-day daily average against the FTSEurofirst 300 index at just 31 percent of its 90-day daily average.
"The amount of profit warnings out there is staggering so it remains hard to see this market make much progress without news about a Spain bailout," said Lex van Dam, hedge fund manager at Hampstead Capital, which manages around $500 million of assets.
Corporate results out of the United States, where the earnings season is at a more advanced stage than in Europe, have also provided investors with reason to be cautious.
Just over a quarter of S&P 500 companies have reported so far, and of these, 33 percent have missed expectations, according to Thomson Reuters Starmine data through to Tuesday.
The reported contraction in earnings for the third quarter year on year is 4.2 percent, with the top analysts still expecting a 2.2 percent contraction, the data showed.
The euro zone's blue-chip Euro STOXX 50 index was up 0.1 percent at 2,479.36, after a 2.1 percent drop on Tuesday.
Some technical analysts see little reason to become too despondent after the previous session's sharp drop.
"I think it has to do a lot more to really get people heading for the exits in a big way," said Phil Roberts, technical strategist at Barclays.
Roberts said October's low of 2,440 should act as a support but if the index were to overshoot to the downside, it would still look constructive above 2,400 - a low at end-August and just above the 200-day moving average.