* FTSEurofirst 300 flat
* Strong Spanish bond auction helps sentiment
* Tesco shares trump M&S after trading updates
By Tricia Wright
LONDON, Jan 10 (Reuters) - A leading European share index
traded flat on Thursday, holding near two-year highs, after
Spain saw good demand at an auction of government debt and
following further evidence of improving economic conditions in
Uncertainty ahead of central bank policy decisions hampered
the index, with meetings later in the session of the European
Central Bank and the Bank of England under the spotlight.
However, the economic picture is not seen as weak enough to
prompt fresh stimulus measures from either, with both widely
seen announcing unchanged policy.
The FTSEurofirst 300 was trading at 1,167.88 by
1150 GMT, having advanced 0.7 percent on Wednesday.
The index has risen around 3 percent since the start of the
year, mirroring gains globally as investors welcomed a U.S.
budget deal to avoid a fiscal crunch that had threatened growth
in the world's largest economy.
"The year's got off to quite a good start. There's still
risk appetite out there and that's just helping prop up the
market," Angus Campbell, head of market analysis at Capital
"I think if there is a dip then that could present a good
buying opportunity because the uptrend still remains intact, so
if we do retrace a little, it may not go very far."
Banks were in demand, ahead 0.6 percent, drawing
continued strength from the recent decision by global regulators
to water down their liquidity requirements.
Traders cited a strong Spanish bond auction as supportive to
market sentiment, with the country's Treasury having sold 5.8
billion euros of bonds, well above its target range of 4 billion
to 5 billion euros.
Some gains were seen among mining stocks after
better-than-expected trade data from China, the world's top
Iron ore imports in China hit a record high in December,
while China's total exports rose faster than expected,
indicating some pick-up in global demand, although the figures
remained weak historically.
"Great data out of China overnight ... If China has indeed
bottomed we can see much higher stock prices in the months
ahead," said Lex van Dam, hedge fund manager at Hampstead
Capital, which manages around $500 million of assets.
Retailers presented a mixed picture. Investors were buying
up Tesco shares while selling its rival Marks & Spencer
on contrasting Christmas sales performances, after M&S's
decision to offer fewer discounts failed to reap rewards.
Marks & Spencer was among the top FTSEurofirst 300 fallers,
off 4.2 percent, after saying sales of clothing, footwear and
homewares slumped 3.8 percent in the 13 weeks to Dec. 29 at UK
stores open more than a year.
In response, Espirito Santo cut its 2013 and 2014 profit
forecasts for the high street retailer by up to 7 percent.
The reaction to the M&S update was in stark contrast to that
of Tesco. Its shares rose 2.4 percent as it posted the highest
sales growth in three years over the highly competitive
Christmas period, a year after its profit warning and showing
that a turnaround plan was starting to work.
Consumer electronics firm Philips was up 3 percent,
the second-biggest FTSEurofirst300 gainer, after BofA Merrill
Lynch upgraded its rating to "buy".
Dutch brewer Heineken was a big faller, down 3
percent, as the same bank cut its rating for the stock to
Negative broker comment also weighed on Germany's Fresenius
Medical, off 2.6 percent as Credit Suisse downgraded
its rating to "neutral".