* FTSEurofirst 300 index rises 0.8 percent
* Volkswagen, Porsche up on merger remark
* Randstad boosted by broker upgrade
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By Joanne Frearson
LONDON, Jan 26 (Reuters) - European shares rose on Wednesday after U.S. President Barack Obama's plan to freeze government spending boosted sentiment, while Porsche jumped as it said its merger with Volkswagen was on track.
By 1001 GMT, the pan-European FTSEurofirst 300 index of top shares was 0.8 percent higher at 1,153.05 points, after falling 0.6 percent on Tuesday.
"Obama's speech has diminished the chances of a double-dip recession. That is a positive thing for the markets," Koen De Leus, strategist at KBC Securities Bolero in Brussels, said. "There seemed to be no catalysts for the market to go down."
In his State of the Union address on Tuesday, Obama proposed a freeze on government spending as well as scrapping loopholes which favour specific industries and cutting the corporate tax rate.
Carmakers gave the biggest boost to the markets, with the STOXX Europe 600 Automobiles & Parts surging 2.4 percent.
Renault jumped 3.9 percent after Les Echos newspaper reported that the French carmaker expects to sell 3 million vehicles in 2013 compared with 2.62 million last year.
German carmakers Volkswagen and Porsche gained 3.3 percent and 4.1 percent respectively, after a senior Porsche family member said the planned merger is on "the right track."
Porsche also posted a 62.7 percent rise in 2010 unit sales in China. Energy stocks were also in demand. BG Group gained 3.4 percent after a new discovery confirmed light oil in the Carioca area, offshore Brazil.
"The key here is that this is yet another discovery along with recent major success offshore Tanzania (multi-TCF gas discoveries) that should increase confidence in BG's ability to deliver its 6-8 percent per annum production growth to 2020," Evolution Securities said in a note.
RANDSTAD GAINS
Looking at individual companies, Dutch staffing company Randstad rose 4.3 percent after Credit Suisse upgraded the company to "outperform" from "neutral".
Temporary power provider Aggreko was 2.7 percent higher, after Goldman Sachs initiated coverage on the company with a "buy" rating.
U.S. December new home sales data are scheduled for release at 1500 GMT and after the European market close, investors will await the outcome of the Federal Reserve's two-day policy meeting, which they expect to show an improving U.S. economic outlook. Across Europe, the FTSE 100 index was up 1.3 percent, Germany's DAX was 1.3 percent higher and France's CAC 40 gained 0.9 percent.
(Reporting by Joanne Frearson; Editing by Erica Billingham)