* FTSEurofirst 300 up 0.5 percent
* Luxury goods up on M&A activity
* Mounting violence in Libya pushes Brent crude above $117
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By Harpreet Bhal
LONDON, March 7 (Reuters) - European shares were higher at midday on Monday as investors snapped up beaten-down stocks and with luxury goods boosted by hopes of a pick-up in merger and acquisition activity.
Gains were tempered, however, by further strength in crude oil prices, with Brent rising above $117 a barrel, fanning concerns high energy prices could spur inflation and derail fragile economic growth.
By 1242 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.5 percent at 1,154.15 points after falling 0.6 percent on Friday.
"It's a risk on, buy-the-dips day, but I'm not quite sure how much longer it's going to last for. I think there is an awful lot to worry about out there," said David Morrison, market strategist at GFT Global.
Burberry and Richemont added 3.6 and 2.9 percent as M&A activity picked up in the sector after luxury goods peer LVMH unveiled a 3.7 billion-euro all-share takeover of Italy's Bulgari, which represented a premium of almost 60 percent for the Italian firm.
Bulgari shares, up 58 percent, were halted from trading for almost an hour because of excessive gains.
A bullish note from Goldman Sachs also helped boost confidence in the sector, with the broker expecting 600 million new customers to enter the market by 2025.
M&A talk also lifted shares in Germany's Tognum, which soared 21.35 percent after Rolls-Royce said it was in talks together with Daimler on acquiring the majority of the diesel engine maker.
Traders said investors were keen to get into the market after falls in the last two weeks which knocked 3 percent off the FTSEurofirst 300 index, and technical analysts see further gains in store for equities.
"The Eurostoxx 50 Index shows a test of the short-term critical support area between the 50-day moving average line at 2,945 and the lower end of the rising trend channel around the 2,928 level," said Roelof-Jan van den Akker, senior technical analyst at ING Commercial Banking.
"A successful test of this support area opens an interesting buying opportunity for a short-term 'Long' position."
POLITICAL UNREST WEIGHS
Lingering concerns over the deepening political unrest in Libya, where fighting disrupted its supplies, as well as the threat of a spread to other oil producers in the region such as Saudi Arabia, kept investors cautious.
Saudi Arabian security forces have detained at least 22 minority Shi'ites who protested last week against discrimination, activists said on Sunday, while the kingdom's Council of Senior Clerics issued a statement backing an interior ministry warning on Saturday that said demonstrations violated Islamic law.
"The market is thinking forward as to what could cause a disruption to the economic recovery -- be that from high commodity/oil prices ...(or) higher interest rates," said Don Fitzgerald, fund Manager at Tocqueville Finance.
The U.S. government reiterated that it could tap its strategic oil reserves in order to safeguard economic growth as surging gasoline prices increase pressure for action.
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 rose 0.3 to 0.6 percent.
In Greece, banking shares lost 0.8 percent, pressured after Moody's slashed the country's credit rating on Monday on fears its efforts to cut debt will not be enough. (Additional reporting by Jon Hopkins and Atul Prakash; Editing by Hans Peters)