Oils, banks help European shares bounce back

* FTSEurofirst 300 up 0.3 pct after steep losses on Thursday

* Energy, banking shares among the top gainers

* Technical outlook remains positive

* For up-to-the-minute market news, click on [STXNEWS/EU]

By Atul Prakash

LONDON, Jan 21 (Reuters) - Stronger banks and oils helped European shares bounce back on Friday from losses in the past session on worries about further monetary tightening by China, and analysts said the technical outlook remained positive.

Investor appetite for risky assets such as equities grew, with the VDAX-NEW volatility index <.V1XI> falling 3 percent. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks <0#.GDAXI>, the higher the market's desire to take risk.

At 0950 GMT, the FTSEurofirst 300 <.FTEU3> index of top European shares was up 0.3 percent at 1,142.73 points after falling 1.1 percent on Thursday. The Euro STOXX 50 <.STOXX50E>, the euro zone's blue-chip index, rose 0.8 percent to 2,950.74.

Technical analysts said that the market had potential to advance further.

"Notwithstanding the weakness in other European markets, the Euro STOXX 50 has been quite resilient and is still within striking distance of recent highs, which is consistent with the bull trend it has been displaying for the last eight months," said Bill McNamara, technical analyst at Charles Stanley.

"It appears to be rising within the confines of a bull channel, which is indicating the possibility of a resistance around the current levels. Although on a broader view, critical resistance is in the region of 3,000 and 3,030."

Energy shares featured among the top gainers, tracking a rebound in crude oil prices after steep losses in the previous two sessions. The STOXX Europe 600 Oil and Gas index <.SXEP> rose 0.8 percent, while BP gained 1.3 percent.

COMPANY RESULTS EYED

Analysts said that investors bought beaten-down stocks and were focusing on company results and macroeconomic numbers.

"Background is still somewhat nervous given concerns over further tightening measures in China," said Keith Bowman, equity analyst at Hargreaves Lansdown.

"The U.S. results season is very much in focus. Some giants are yet to report. The results are certainly important in assessing the broader economic health that we have got across the globe."

China, the world's second-biggest economy, is expected to focus on controlling inflation through tighter policies after its economy maintained a strong growth momentum in the fourth quarter and inflation slowed less than expected.

Investors waited for more corporate results from across the Atlantic for near-term market direction, with Bank of America and General Electric among major companies reporting quarterly results.

Banks were in demand on hopes that economic conditions will improve. The STOXX Europe 600 banking index <.SX7P> rose 0.8 percent, while Dexia and Bank of Piraeus rose 4.1 percent and 4.6 percent respectively.

Royal Bank of Scotland gained 5.6 percent as hopes that the part-nationalised bank may leave a government asset protection scheme -- set up to insure RBS' most risky assets -- drove the stock higher.

Across Europe, Britain's FTSE 100 <.FTSE>, Germany's DAX <.GDAXI>, France's CAC 40 <.FCHI> and Spain's IBEX <.IBEX> advanced 0.2 to 1.4 percent. (Editing by Mike Nesbit)