* FTSEurofirst 300 index finishes 0.3 percent higher
* Telecoms boosted by merger talks, upbeat broker note
* Greek banking stocks drop after Moody's downgrade
By Atul Prakash
LONDON, March 8 (Reuters) - European shares ended higher on Tuesday as a decline in crude oil prices eased concerns about the pace of global economic recovery, though technicals suggest short-term gains could be limited.
A jump in Deutsche Telekom on renewed talk that the company and Sprint Nextel may be in discussions to combine their operations in the United States boosted telecom shares. However, miners tracked a drop in key metals.
Greek shares fell 3.8 percent, while the banking index dropped 6.3 percent. National Bank and EFG Eurobank fell 6.8 percent and 6.1 percent respectively, a day after Moody's cut Greece's credit rating by three notches, raising the spectre of a debt restructuring.
The FTSEurofirst 300 index of top shares closed 0.3 percent higher at 1,147.43 points, with volume at 103 percent of the 90-day daily average. The euro zone's blue-chip Euro STOXX 50 index rose 0.5 percent to 2,945.42 points.
Charts indicated the market's gains could be limited. The STOXX 50 traded below its 50-day moving average of 2,948.15 and hovered near the bottom of its short-term uptrend channel.
"There are signals in place to suggest that the market has reached a short-term top," said Bill McNamara, technical analyst at Charles Stanley, who saw support at 2,880 and further at 2,800 -- the 61.8 percent Fibonacci retracement of the index's drop from April to May last year.
"The jury is still out as to whether this is developing into a corrective phase, but if a key level is taken out, then the implication would be that a full-fledged correction is underway," he said, referring to 2,836 as the key level.
Telecom shares were among the top gainers, helped by merger talk and on an upbeat note from Morgan Stanley, which raised its overall stance on telecoms services to "attractive", saying downside risks in the sector were less pronounced, traders said.
The European telecom sector index rose 1.9 percent, with Deutsche Telekom advancing 4 percent. The stock's volume was nearly 400 percent of the 90-day daily average.
MINERS UNDER PRESSURE
Miners topped the decliners' list as nickel prices fell more than 2 percent, though copper recovered after earlier losses. The STOXX Europe 600 Basic Materials index was down 0.9 percent, while Antofagasta fell 2.7 percent.
Shares in west African-focused gold producer Randgold Resources declined 8.2 percent on investor concern that violence in Ivory Coast could hit its operations there. Randgold share volume was 350 percent of the 90-day daily average.
Investors kept an eye on crude, which could jump further on unrest in the Arab world. In Libya, government troops, tanks and warplanes attacked rebels, pressing their campaign to crush an insurrection against Muammar Gaddafi.
The FTSEurofirst 300 is down 4 percent since a 29-month high on Feb. 18, while U.S. crude oil has gained more than 20 percent over the same period. OPEC was considering measures to boost production to ease anxiety about a supply disruption in Libya. Lothar Mentel, chief investment officer at Octopus, said although a 2011 oil price shock was a possibility, it was unlikely.
"The political uncertainty has meant little change being made to our asset allocation in the past couple of weeks ... although portfolio activity has remained brisk, as a result of investing in different funds within the same asset class," said Mentel, whose fund company manages about $3.4 billion.
Some fund managers said that despite the sharp rise in geopolitical risks, equities had not suffered a real correction because of strong inflows into the asset class.
"Massive inflows into equities so far this quarter have been really supportive for stocks," said Jean-Yves Dumont, head of asset allocation strategy and funds at Dexia Asset Management, which manages about 86 billion euros. "We're on track for the strongest quarterly inflow since the first quarter of 2007." (Additional reporting by Blaise Robinson in Paris; Editing by David Holmes)