Chemicals push European shares higher; Fed eyed

* FTSEurofirst 300 index rises 0.5 percent

* BP rises after plugs Gulf of Mexico well

* K+S gains on China's Potash interest report

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

By Joanne Frearson

LONDON, Sept 20 (Reuters) - European shares rose on Monday, after four days of losses as investors remained optimistic ahead of Tuesday's Federal Reserve meeting, with K+S gaining on a media report of Chinese interest in Canada's Potash .

By 0849 GMT, the pan-European FTSEurofirst 300 <.FTEU3> index was 0.5 percent higher at 1,078.85 points after retreating on Friday when figures showed U.S. consumer sentiment dropped to its lowest level in more than a year.

"After the falls on Friday, we have not had any bad news on the weekend so sentiment is more positive," said Will Hedden, sales trader at IG Index. "But we expect a choppy week, with the main importance being the Fed meeting tomorrow."

"There is plenty of pressure on the Fed to put forward what they are going to do to stop the U.S. going into a double dip recession. It will be the main focus of the week and the market could go either way. We expect trading to be quite volatile."

The Fed is expected to tread water at its policy-setting meeting, with no new steps to ease monetary policies but with a renewed promise to keep its portfolio from shrinking. [ID:nSGE68J04M]

Chemical stocks featured among the top performers. K+S rose 3.3 percent on a media report that Chinese chemical conglomerate Sinochem Group has formally asked the government to back a bid for Potash Corp -- a rival of K+S.

"(This) might again lead to speculations on a higher bid for Potash Corp which would also work positive for peer K+S," a trader at broker Alpha writes.

Elsewhere, French defence company Safran gained 3.2 percent after investors applauded the company's acquisition of L-1 Identity Solutions and its core biometric identity business. [ID:nLDE68I0KJ]

However, French aerospace supplier Zodiac Aerospace fell 2.8 percent after it announced late on Friday that key family shareholders had signed a pact not to sell their shares until April 2012.

BP RISES

Commodity stocks were in demand. BP gained 1.4 percent after it said it permanently "killed" its deep-sea well in the Gulf of Mexico that ruptured in April. Its peers, BG Group , Royal Dutch Shell and Total were 1.2 to 1.5 percent higher.

On the downside, banking stocks edged lower, with the STOXX Europe 600 Banks <.SX7P> slipping 0.1 percent. French bank Natixis fell 1.6 percent, on its first day on Paris's blue-chip index, after Credit Suisse cuts its rating on the stock to 'neutral' from 'outperform'.

Greek banks <.FTATBNK> rose 0.4 percent. Greece said it will postpone stress testing the country's banks for later in the autumn, a source at the central bank told Reuters on Monday. A source also told Reuters on Sunday Greece's international lenders assured investors they would not abandon Athens at the end of a three-year bailout plan if it fulfilled tough reforms but failed to regain market trust. [ID:nLDE68I0D0]

Technical's showed a key index was facing resistance. The Euro STOXX 50 <.STOXX50E>, the euro zone's blue chip index, rose 0.5 percent to 2,770.68 and was just under its 200-day moving average of 2,778.43. The index fell below this level on Friday after spending four sessions above it.

Across Europe, the FTSE 100 <.FTSE> index was 0.9 percent higher, Germany's DAX <.GDAXI> was up 0.5 percent and France's CAC 40 <.FCHI> rose 0.8 percent.

The Thomson Reuters Peripheral Eurozone Countries Index <.TRXFLDPIPU> gained 0.7 percent. (Reporting by Joanne Frearson; Editing by Mike Nesbit)