* FTSEurofirst 300 up 0.3 pct, adds to Tuesday's small gains
* Portugal 2-year bond auction in focus
* EADS rises on outlook, new orders
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By Blaise Robinson
PARIS, March 9 (Reuters) - European stocks rose in early trade on Wednesday, adding to the previous session's tentative rebound as Brent crude retreated for a third day, though gains were limited as investors braced for Portugal's bond auction.
European aerospace and defence group EADS rose 3.2 percent after it forecast higher revenue and stable core operating profit this year while bagging a slew of Airbus orders in the last 24 hours.
At 0930 GMT, the FTSEurofirst 300 index of top European shares was up 0.3 percent at 1,151.56 points.
The index is down about 3.5 percent since reaching a 29-month high on Feb. 18, while U.S. crude oil prices have gained more than 20 percent over the same period, a rally fuelled by unrest in Libya and fears of contagion to other countries in the Middle East and North Africa.
Oil retreated on Wednesday as reassurances from OPEC members of ample spare capacity helped sooth worries about production losses from Libya.
Energy stocks lost ground, with BP down 0.4 percent and Repsol down 1.2 percent.
"I don't see too much direction either way. Everyone's still focused on what's happening in the commodity space," said a head of institutional trading at a London-based investment bank.
Investors awaited results from Portugal's two-year bond auction, as concerns over sovereign debt levels in the euro zone resurface.
Portugal looked set to pay a higher premium than previously to sell up to 1 billion euros of two-year bonds, after its two-year yields hit their highest since May and 10-year yields marked new euro lifetime highs on Wednesday.
"With the Portuguese bond auction today and euro zone sovereign debt issues coming back into the forefront, the market could be in for a turn," said Matt Brown, trader at Catalyst Markets.
Portugal's main stock index PSI 20 was down 0.4 percent, while the Peripheral Eurozone Countries Index was down 0.3 percent.
Tech shares lost ground, with Alcatel-Lucent down 4.3 percent, Infineon down 1.2 percent and STMicroelectronics down 0.8 percent after U.S. tech bellwether Texas Instruments issued a current-quarter earnings target slightly below Wall Street estimates, citing weaker-than-expected demand for chips.
Around Europe, UK's FTSE 100 index was down 0.1 percent, Germany's DAX index up 0.5 percent, and France's CAC 40 up 0.2 percent.
The recent pull-back has trimmed the benchmark indexes' year-to-date gains, with the FTSE 100 now up only 1.2 percent so far this year, the DAX up 4.2 percent and the CAC 40 up 5.8 percent.
But despite the rise in geopolitical risks, fund managers said inflows into equities have been brisk this quarter.
"Appetite for risk has risen, which has been supporting equities ... Overall, stocks are still relatively undervalued," said Francis Ailhaud, CEO of Groupama Asset management, which has 90 billion euros in assets under management.
Europe's broad STOXX 600 index currently trades at 10.9 times expected earnings, below a 10-year average of 13.6, according to Thomson Reuters Datastream data. (Additional reporting by Joanne Frearson and Simon Jessop in London; Editing by Will Waterman)