(Clarifies first bullet to show rise is 0.5 percent)
* FTSEurofirst 300 ends 0.5 percent higher after choppy session
* Basic resources shares among top gainers on strong metals
* Equities attractive in terms of valuations, other assets
By Atul Prakash
LONDON, March 23 (Reuters) - European shares ended higher on Wednesday, helped by strong mining stocks, and analysts said markets should rise even higher once visibility on issues such as the Libyan conflict and Japanese nuclear situation improves.
Market experts said equities were attractive in terms of valuations and as compared to other asset classes, while chartists saw a key index bouncing back in the second quarter.
The FTSEurofirst 300 index of top European shares ended 0.5 percent higher at 1,112.36 points after falling to 1,102.35. Volumes were 95 percent of its 90-day daily average.
Miners were the best performing sector, tracking gains in key base metals that rose on expectations of a supply deficit this year. The STOXX Europe 600 Basic Materials index rose 2 percent, while Xstrata was 3.5 percent higher.
"There is an unusual amount of uncertainty and as long as that prevails we have to live with fairly high volatility," said Klaus Wiener, chief economist at Generali Investments, which manages about $465 billion.
"The macro environment will remain sufficiently supportive for the markets to continue to drift higher, once visibility on issues such as Libya, Japan and the sovereign credit crisis improves. In relative terms, equity markets are a lot more attractive than government bonds."
Equity research firm AlphaValue said debt-financed merger and acquisition actions will effectively inject new flows into the market. It also said its confidence in a healthy earnings growth of about 15 percent for equities in 2011 had dropped over the last three weeks, but noted the market was still cheaper.
According to Thomson Reuters Datastream, Europe's STOXX 600 index trades at 10.2 times one-year forecast earnings, below a 10-year average of 13.6, and against a ratio of 12.5 for the U.S. S&P 500.
FINANCIALS UNDERPERFORM
Banking shares underperformed the wider market on renewed concerns of a euro zone debt crisis. The European banking index fell 0.04 percent, while Portugal's PSI 20 dropped 1 percent. Banco Espirito Santo and Banco BPI fell 0.5 percent and 3.5 percent respectively.
According to a study by Standard & Poor's, a severe economic recession could force European banks to raise up to 250 billion euros ($355 billion) and cause government borrowing requirements to rise by a fifth.
European Union leaders are set to delay a decision on how to strengthen their multi-billion euro rescue fund beyond a summit this week. The market fears a political crisis in Portugal could force the country to seek help, but Wiener said a possible bailout was already priced in.
"The government may fall, but in the end it's very likely that Portugal will ask for help anyway. Looking at what Portugal has to pay in the primary and secondary markets, the economic incentive to ask for help is huge."
Charts predicted more gains for the Euro STOXX 50 index, which rose 0.4 percent to 2,866.23 points.
"We are advising our clients to buy on the weakness. We expect more strength in the second quarter and a rally into the region of 2,950 and 3,000 during late April and the first half of May," said Michael Riesner, technical analyst at UBS Investment Bank. He saw support at last week's low of 2,717.
London's leading shares showed little reaction to the UK budget as investors weighed up a cut in corporation tax against a downgrade of growth forecast.
"We may see this as a budget that attempts to consolidate and yet one that justifies being seen as a credible vessel that attempts to create economic stability," said Howard Wheeldon, senior strategist at BGC Partners. (Editing by Jon Loades-Carter)