* FTSEurofirst 300 up 0.2 pct; volumes low
* Kingfisher, Next gain after results
* Traders say Portugal bailout priced-in
* For up-to-the-minute market news, click on [STXNEWS/EU]
By Harpreet Bhal
LONDON, March 24 (Reuters) - European shares edged higher in early trade, lifted by gains in retailers after upbeat results in the sector, though low volumes showed investors stayed on the sidelines as caution over the euro zone debt crisis lingered.
By 0957 GMT, the pan-European FTSEurofirst 300 <.FTEU3> index of top shares was up 0.2 percent at 1,115.06 points, though volumes were low at just 27 percent of its 90-day average.
Europe's biggest home improvement retailer Kingfisher
Shares pared losses from earlier in the session as traders said a bailout for highly indebted Portugal was largely priced in as its prime minister resigned following parliament's rejection of the government's austerity measures.
"This turnaround (from earlier losses) in the Portuguese stock market shows the market had already priced in this scenario of the prime minister's resignation and political instability," said Juan Dieste, trader at Orey iTrade in Lisbon, adding that low volumes exacerbated moves.
Although a bailout has been priced-in, the political instability is likely to prevent European Union (EU) leaders from taking tough decisions to deal with the bloc's debt troubles at a summit which begins on Thursday. [ID:nLDE72M2OC]
"If Portugal is going to require some loans from the (EU) funding facility the risk is that, if there is some difficulty somewhere else, the facility is going to be exhausted," said Mike Lenhoff, chief strategist at Brewin Dolphin.
"It's a setback to the positive steps that would have been taken to expand the lending capacity of the funding mechanism."
An EU official said member states were putting pressure on Lisbon to request help, concerned that continued resistance would endanger the stability of the 17-country euro zone, but said no talks on a bailout had begun. [ID:nBRU011393]
Analysts at UBS said looking at Greece and Ireland as precedents, further market pressure is likely but the crisis also posed an opportunity for investors to buy quality stocks at attractive valuations.
"Investors turned extremely risk averse in these two markets (Greece and Ireland), particularly on the banks, and as such we fear further pressure on financial stocks, and possibly utilities," UBS analysts wrote in a note.
"Having said that, the bailout was a good opportunity for
value investors to pick up good companies at cheap valuation so
we also highlight our preferred value picks in Portugal: Brisa
ATTRACTIVE VALUE
The FTSEurofirst 300 index hit a 3-1/2 month low at 1,066.62 points last week following fears of a nuclear crisis in Japan after a massive earthquake and tsunami, however it has since recovered to trade just 1.6 percent off a retracement to levels hit prior to the earthquake.
Traders said investors were buying companies on attractive valuations in Europe, following a 3.1 percent dip on the index last week.
"Markets were extremely volatile in the last few weeks and there are sectors such as insurers and energy that look like good buys at the moment after taking a big hit," said Scott Reinert, sales trader at IG Index.
The STOXX Europe 600 insurance sector <.SXIP>, which has lost 5.1 percent so far this month, traded up 0.1 percent.
Attractive valuations in Europe also helped lift the outlook for equities. Thomson Reuters Datastream showed the STOXX Europe 600 <.STOXX> carrying a forward price-to-earnings ratio of 10.2, below a 10-year average of 13.6. (Additional reporting by Harro ten Wolde in Frankfurt and Patricia Rua in Lisbon; Editing by Mike Nesbit)