* FTSEurofirst 300 index steadies
* Nokia down as loses market share
* GDF Suez drops on stake sale
By Atul Prakash
LONDON, May 14 (Reuters) - European shares steadied near five-year highs on Tuesday after early losses, with charts pointing to further upside and improving U.S. economic fundamentals lifting the outlook for many European companies.
At 1213 GMT, the FTSEurofirst 300 index of blue chip European shares was flat at 1,231.44 points, after falling 0.2 percent in the previous session.
The index touched a five-year closing high on Friday and is up 8 percent this year on encouraging U.S. data and persistent liquidity support from central banks.
"I don't think it's the beginning of a correction. The market is just taking a break to consolidate, but there is no major deterioration in the fundamentals," Daniel McCormack, strategist with Macquarie, said.
"We had a weak reporting season and it's remarkable how well the market has done through that period. The medium-term outlook is excellent. The equity risk premium is still way too high and I expect a lot of upside on a one- to three-year view."
The euro zone blue chip Euro STOXX 50 was up 0.1 percent at 2,780.14 points and charts suggested the index was poised to set new highs after a short period of consolidation.
"The index will make a new attempt to continue its recent upward journey as moving averages are rising and overall technical condition remains supportive," Petra von Kerssenbrock, technical analyst at Commerzbank, said.
The index's 50-day, 100-day and 200-day moving averages have risen since late April and it still trades within a trend channel that has been in place since the middle of last month. It could face some strong resistance on the upside though.
"The Euro Stoxx 50 index has fallen from a high ... 2,807 is the 76.4 percent Fibonacci retracement of the wave down in 2011 and represents strong resistance," Murray Gunn, head of technical analysis at HSBC, said.
"Also, volume has been contracting as the rally has unfolded over the last couple of weeks. A drop below 2,745 would be the first sign that a significant top was in place."
Among individual movers, Jeronimo Martins dropped 6.2 percent after a subsidiary of Heerema Group said on Monday it was selling a stake of up to 5 percent in the retailer.
Deutsche Post rose 2.6 percent after the company reported better-than-expected quarterly results.
United Utilities climbed 3.6 percent after peer Severn Trent confirmed it had received a takeover approach from a consortium. Severn Trent surged 14.5 percent.
Nokia dropped 4.2 percent after losing some market share in the first quarter, according to research company Gartner, while gas and power utility GDF Suez fell 2.5 percent after Groupe Bruxelles Lambert said it had launched the sale of a 2.7 percent stake in the company.
Shares in Commerzbank tumbled 3.2 percent on news the Germany's second-largest lender is offering shares at a deep discount in a capital hike.
Analysts advised against building a strong cyclical portfolio saying the economic environment in Europe was still challenging. Investors could consider buying defensives like consumer staples and pharmaceuticals, they said.
The poor economic situation in the euro zone was highlighted by the Mannheim-based ZEW think tank, which said German analyst and investor sentiment edged up much less than expected in May.