European shares little changed; Deutsche Bank, autos up

* FTSEurofirst 300 index up 0.1 percent

* Deutsche Bank (Other OTC: DBAGF - news) seen avoiding capital increase, up 0.4 pct

* Auto sector index set for best week since 2011

* Telefonica (Amsterdam: TA6.AS - news) down on reported mobile merger doubts

By Sudip Kar-Gupta and Danilo Masoni

LONDON/MILAN, Oct (HKSE: 3366-OL.HK - news) 8 (Reuters) - European shares were little changed on Thursday after days of gains, with profit taking across several sectors offset by stronger auto stocks, while Deutsche Bank was volatile after rigorously cleaning up its balance sheet.

The pan-European FTSEurofirst 300 index was up 0.1 percent and the euro zone's blue-chip Euro STOXX 50 index was 0.05 percent lower.

Peregrine & Black senior sales trader, Markus Huber, said some investors with "long" positions - betting on a rise in the market - may look to cash in at this juncture.

"Overall sentiment is neutral today. In light of the recent strong run-up in share prices there is plenty of less positive news out which will provide 'longs' with a welcome excuse to take some money off the table," he said.

Deutsche Bank shares fell about 2 percent after it said late on Wednesday that it made a record pre-tax loss of 6 billion euros. But they recovered to stand 0.4 percent higher with some analysts arguing that the company's decision to cut or skip dividend payments would allow it to avoid a capital increase.

Other traders and analysts said Deutsche's plans to take large writedowns at its investment banking unit made sense as a "kitchen-sink" exercise, covering all contingencies.

"Whenever a company clears everything out in one go, it helps to remove the uncertainty around it. They've taken decisive action," LONTRAD managing director Zeg Choudhry said.

Auto shares rose 1.4 percent and were set for their best weekly gain since 2011, as investors turned more optimistic on the sector battered by an emissions scandal at Volkswagen (LSE: 0P6N.L - news) .

Investors are unwinding negative bets on the sector, one trader said, while JPMorgan analysts said the upcoming quarterly results season would be "supportive" for the sector's stock-price rebound.

Fiat Chrysler rose 2.9 percent as hopes around the listing of its luxury sports car unit Ferrari in the second part of October. A labour deal with U.S (Other OTC: UBGXF - news) . trade unions workers that averted a threatened strike was also seen as positive.

Coloplast (Xetra: CBHD.DE - news) fell 4 percent, leading losers on the pan-European FTSEurofirst 300 index down after UBS (NYSEArca: FBGX - news) downgraded the Danish healthcare sector company to "sell" from "neutral", slashing its target price to 375 crowns from 500.

Other stocks such as DNB (Other OTC: DNBHF - news) and Statoil (Xetra: 675213 - news) were lower after brokers' target price cuts.

Spanish phone group Telefonica fell 2.8 percent in a weaker sector after reports that the head of British regulator Ofcom suggested she has doubts on a planned merger between O2 and Three. Telefonica has agreed to sell O2 to Three.

Today's European research round-up ($1 = 0.8857 euros) ($1 = 6.5977 Danish crowns) (Additional reporting by Alistair Smout and Alasdair Pal; Editing by Louise Ireland)