* FTSEurofirst 300 up 0.4 percent; hits two-week highs
* Focus on euro zone debt situation, Portugal
* Tech shares among top gainers on Oracle's outlook
By Atul Prakash
LONDON, March 25 (Reuters) - European shares climbed to two-week highs on Friday as stronger tech shares on Oracle's upbeat view on spending lent support, though persistent worries about the euro zone debt situation limited gains.
At 1003 GMT, the FTSEurofirst 300 index of top European shares was 0.4 percent higher at 1,127.85 points, the highest since March 11, when a massive earthquake and tsunami hit Japan. The index rose 1 percent on Thursday.
Technology shares gained as Oracle forecast on Thursday a 4 to 14 percent rise in sales of new software this quarter, fuelling hopes a global resurgence in technology spending remains intact. The STOXX Europe 600 Technology index rose 0.8 percent, while SAP rose 2.7 percent.
Experts said equities had potential to gain further in the long term as fundamentals were improving and shares were better alternatives. A Reuters poll of about 30 analysts and fund managers showed that the STOXX Europe 600 is seen gaining around 11 percent in 2011.
"European equities as an asset class are relatively attractive as they combine reasonable valuations, high dividend yields and healthy balance sheets," said Hans van de Weg, fund manger at ING Investment Management.
"Strong liquidity in financial markets in general, combined with the lack of attractive alternative asset classes are also positive factors underpinning demand for European equities, said van de Weg, who manages 750 million euros in European equities.
The market's recent correction has dragged European stocks' valuations to three-month lows. The STOXX Europe 600 index carries a forward price-to-earnings (P/E) ratio of 10.2, a level not seen since mid-December and well below its 10-year average of 13.6.
"The underlying picture is very supportive of equities. The global economy is in a pretty good shape and we have valuations which are reasonable to low in the equity market. We are bullish on markets and think that we will make progress from here," said Ian Richards, European equity strategist at RBS.
FOCUS ON EURO ZONE DEBT
Financial stocks fell, with the STOXX Europe 600 banking index down 0.2 percent. Banco de Valencia fell 1 percent, while Banco Popular dropped 0.6 percent.
Standard & Poor's downgrade of Portugal's credit ratings by two notches to BBB hurt sentiment. The rating agency also warned it could cut it again as early as next week depending on the final shape of the euro zone bailout fund.
European leaders agreed on Thursday to raise their financial rescue fund to the full 440 billion euros ($623 billion) by June, but avoided discussion of Portugal which is under pressure to seek a bailout following the resignation of its prime minister.
"Even though the immediate liquidity issues are being dealt with, the longer-term solvency issues remain. This means that the euro zone and its markets are not out of the woods yet," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.
"If Portugal ends up in the EFSF, which is not unlikely, it would help markets as it would contain the liquidity risk," he said, referring to the European Financial Stability Facility.
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 were flat to 0.7 percent higher. Portugal's PSI 20 was up 0.2 percent.
BP fell 0.6 percent after an arbitration panel thwarted a deal with the British oil major and Rosneft, Russia's largest oil firm. ($1=.7062 Euro) (Additional reporting by Blaise Robinson in Paris; Editing by Jon Loades-Carter)