* FTSEurofirst 300 up 0.4 percent after Friday's 4-week lows
* Telenor surges after a merger deal; supports telecoms
* Banks, miners up; weaker pharma shares limit gains
* For up-to-the-minute market news, click on
By Atul Prakash
LONDON, Oct 5 (Reuters) - European shares rose on Monday after hitting a four-week low in the previous session, with telecoms shares boosted by a merger deal between Norway's Telenor and its Russian partner Alfa Group.
Miners advanced after RBS upgraded its outlook for metals prices and said sovereign wealth funds might take interest in the sector.
Weaker pharmaceutical stocks limited gains.
The FTSEurofirst 300 index of top European shares was up 0.4 percent at 967.30 points by 1056 GMT, after falling for three sessions in a row. The index, which slumped 45 percent last year, is up 16 percent in 2009 and has surged 50 percent since hitting a record low in early March.
Sentiment also improved after Markit's Eurozone Services Purchasing Managers' Index of around 2,000 companies showed the euro zone's services economy returned to growth for the first time in 16 months in September at a slightly better rate than first expected, but job losses grew.
"The positive thing is that the PMI figures were better than expected, but we have to see whether this positive momentum is going to stay," said Koen De Leus, economist at KBC Securities.
"The earnings season is going to be watched very closely. For the moment, the markets have taken into account that the results are going to be good, but the figures will have to be much better than expected to boost the market further."
Telenor shares jumped 13 percent after the company and its key partner in Russia, the Alfa Group, agreed to merge their Russian and Ukrainian holdings into a New York-listed mobile operator worth over $23 billion.
The news also helped the telecom sector, with TeliaSonera, Mobistar, Vodafone, Telefonica and Tele2 rising 0.4-3.6 percent.
EARNINGS RESULTS EYED
Investors remained cautious and refrained from aggressively buying equities following Friday's worse-than-expected U.S. jobs report and ahead of the new U.S. corporate earnings season, which begins this week with aluminium giant Alcoa.
With second-quarter earnings primarily boosted by cost-cutting, investors want to see if the latest quarterly results will show an improvement in revenues.
"The tone of the market has been dominated by the (U.S.) employment report," said Bernard McAlinden, investment strategist at NCB Stockbrokers. "But the improvement in the labour market is still very much on trend."
Miners rose after RBS upgraded its stance on several mining companies and said that as the recovery process got underway, mining assets could fall under the radar of China as the country looked to broaden its overseas direct investment in mining by between $8 billion and $25 billion for the next five years.
BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose 1.3-4.1 percent.
Banks were broadly higher. Lloyds, Royal Bank of Scotland, Credit Agricole, Natixis and Commerzbank rose 0.6-3.3 percent.
Standard Chartered was flat. Two people familiar with the matter said its talks to buy assets in China, India and Malaysia from rival RBS had collapsed due to differences over valuation.
StanChart was not immediately available for comment.
But drugmakers were under pressure. AstraZeneca, GlaxoSmithKline, Novartis, Novo Nordisk and Sanofi-Aventis fell 0.3-0.6 percent.
ArcelorMittal rose 1.8 percent after its chairman and main owner, Lakshmi Mittal, told The Financial Times that it was close to pulling out of a $20 billion plan to build two steel plants in India due to difficulties in buying land.
Nationalised German real estate lender Hypo Real Estate fell 0.6 percent. It pegged its capital needs at 10 billion euros ($14.54 billion) due to past and expected future losses, its chief executive said on Monday.
Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 rose 0.1-0.3 percent. (Additional reporting by Brian Gorman, editing by Will Waterman)