* FTSEurofirst 300 index gains 0.3 percent in choppy trade
* Mining shares feature among top gainers; track metals
* Retailers slip; Hennes & Mauritz down after results
By Atul Prakash
LONDON, Jan 27 (Reuters) - European shares rose on Thursday, supported by stronger miners, though a cut in Japan's credit rating by Standard & Poor's reminded investors about the high debt situation in several peripheral European countries.
Mining shares topped the gainers list as key base metals prices jumped on supply concerns and on hopes that global demand for raw materials will rise. Investors hope that the U.S. Federal Reserve's move to maintain a $600 billion bond-buying plan will help an economic recovery.
The STOXX Europe 600 Basic Materials index rose 1.6 percent, while Anglo American gained 1.5 percent. At 1254 GMT, the FTSEurofirst 300 index of top shares advanced 0.3 percent to 1,156.19 points after falling to a low of 1,150.12 earlier in the session.
"Investors are a little bit nervous, but the bias is still reasonably on the upside. The winners of the last year are more or less being sold and people are pouring money into the ones that did not perform so well in 2010," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.
"But we still have many more challenges to face. There is a possibility of new tensions in the euro zone and Japan reminds us that many countries are reasonably indebted. I think we are in a late stage of this rally and are not too far from some correction."
Standard & Poor's cut Japan's long-term sovereign debt rating for the first since 2002 saying the country's government lacked a coherent plan to tackle its mounting debt.
Politicians and credit ratings agencies have been warning for years that Japan needs to lower its public debt pile, by far the worst among rich nations at double the size of its economy, but progress has proved elusive.
Among the Group of Seven industrial countries, the United States, Britain, Italy and France are all carrying large deficits. A debt crisis in some euro zone countries prompted equity investors to trade cautiously in the second half of 2010 and is still keeping the markets jittery.
"Investors are just range trading after a decent move yesterday," said Giles Watts, head of equities at City Index.
RETAILERS SLIDE
Retailers were the top decliners, led lower by Swedish budget fashion giant Hennes & Mauritz. Its shares fell 6.9 percent after it posted a surprise fall in pretax profit and its gross margin fell more than expected. The European retail sector index fell 1.3 percent.
Drugmakers were broadly lower, with Novartis falling more than 2 percent after missing forecasts with a 10 percent drop in fourth quarter core earnings per share (EPS).
AstraZeneca, however, rose 1.4 percent as it cheered investors with above-forecast fourth quarter earnings and a surprise promise to buy back $4 billion of shares.
Nokia fell 5 percent after the world's top cellphone maker by volume reported its third profit fall in a row and warned of a weak start to 2011.
On the positive side, expectations of a global economic recovery helped automakers. The STOXX Europe 600 Automobile and Parts index rose 0.6 percent, while BMW was up 1.6 percent.
"Recent economic indicators from the U.S. have been broadly positive, with even the housing market receiving a boost with yesterday's new home sales data, and the bulls will be hoping for more of the same ahead of tomorrow's key GDP figures," said Anthony Grech, head of research at IG Index. (Editing by Hans Peters)