European shares inch up helped by H&M and Shire

(ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets for site in development. See the bottom of the report for more details)

* FTSEurofirst 300 index gains 0.2 percent

* H&M advances after encouraging update

* Healthcare top sectoral gainer led by Shire (Xetra: S7E.DE - news)

* Italy banks rise for first time in 10 sessions

By Atul Prakash

LONDON, April 6 (Reuters) - European equities inched higher on Wednesday after steep declines in the previous session, with the retail sector boosted by a less-than-expected Hennes & Mauritz profit fall.

Shares (Berlin: DI6.BE - news) in Hennes & Mauritz, the world's No. 2 clothes retailer, rose 4 percent after saying the impact of the strong U.S (Other OTC: UBGXF - news) . dollar had started to wane and should turn neutral or slightly positive by the fourth quarter.

Healthcare stocks were the top sectoral gainer, up 1 percent, with investors scrutinising news of U.S. drug maker Pfizer (NYSE: PFE - news) agreeing on Tuesday to terminate its $160 billion agreement to acquire Allergan (NYSE: AGN - news) , in a victory to U.S. President Barack Obama's drive to stop tax-dodging corporate mergers.

Shire, which plans to buy Baxalta (Berlin: 9BX.BE - news) in a $32 billion cash and stock deal that will make it one of the world's leading rare disease specialists, was up 2.7 percent.

Brenda Kelly, head analyst at London Capital Group, said Shire was now viewed as a target following the collapse of Allergen/Pfizer, while some other analysts said the Shire-Baxalta deal was unlikely to be impacted by the proposed U.S. rules on tax-avoiding corporate "inversions", which lower companies' tax bills by redomiciling overseas.

"With Shire being an Irish tax domiciled company, we are not clear to what extent these rules may be important. But we do not see the possible loss of this level of tax as likely to derail management's strong desire to complete the transaction," Credit Suisse analysts said in a note.

The pan-European FTSEurofirst 300 index was up 0.2 percent at 1,290.97 points by 1054 GMT after falling 1.9 percent in the previous session.

The Italian banking sector index rose for the first time in ten sessions, as the country appeared to be making progress in addressing the industry's long running problems.

Sources close to the matter said Italy is considering setting up a state-backed fund that would help troubled lenders by buying up bad loans and plug capital shortfalls.

Shares in Fortum (LSE: 0HAH.L - news) and Swedbank (LSE: 0H6T.L - news) fell 11 percent and 5.7 percent respectively after going ex-dividend.

Today's European research round-up

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Mike Dolan, Markets Editor EMEA.

(Additional reporting by Danilo Masoni; Editing by Tom Heneghan)