European shares weighed by weaker autos; Taylor Wimpey, Vodafone rise

(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 steadies after touching two-week highs

* Fiat Chrysler leads auto sector lower after downgrade

* Taylor Wimpey (LSE: TW.L - news) , Vodafone surge after update

By Atul Prakash and Danilo Masoni

LONDON/MILAN, May 17 (Reuters) - European shares steadied on Tuesday with gains companies such as Taylor Wimpey and Vodafone following encouraging updates offset by a weaker auto sector.

The pan-European FTSEurofirst 300 was little changed by 1245 GMT after earlier rising to its highest since early May. The index, which closed flat in the previous session, is still down 8.5 percent this year.

Taylor Wimpey advanced 4.8 percent after the housebuilder announced a new special payout, promising investors about 1.3 billion pounds over three years, underpinned by strong demand for property in the UK.

Vodafone was up 2 percent after the world's second-largest mobile phone operator said its earnings growth would accelerate this year. The group said a programme to improve its networks had boosted demand in Europe and helped it to return to underlying growth in 2016 revenue and core earnings for the first time since 2008.

"Demand for data continues to grow strongly ... and Vodafone have invested heavily in infrastructure to capitalise on this," Steve Clayton, head of equity research at Hargreaves Lansdown (LSE: HL.L - news) , said.

The STOXX Europe 600 Auto index fell 2.3 percent, making it the top sectoral loser. Fiat Chrysler (FCA) fell 4.4 percent after Exane BNP Paribas downgrades the stock to "underperform".

"After 7 years of global auto expansion - and unprecedented NAFTA returns - FCA has done too little to insure itself against a downturn in our view. As the end of a lease driven bubble approaches, and M&A optionality fades, FCA looks out of time," it said in a note.

Greek banks advanced 4 percent, with UBS (LSE: 0QNR.L - news) turning more positive on the Greek banking sector arguing that signs of progress in talks with Greece's lenders meant the sector could rebound.

"The starting point is very challenging and risks abound, but we see a fundamental investment case and valuations suggest upside potential," UBS analysts said, referring to Greek banks.

The STOXX Europe 600 Basic Resources index rose 0.7 percent, coming off earlier highs after copper prices slipped towards the recent lows brought about by a resurfacing of worries over demand growth in top consumer China.

Today's European research round-up

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). In a real-time, multimedia format from 0600 London time through the 1630 closing bell, it will include the best of our market reporting, Stocks Buzz service, Eikon graphics, Reuters pictures, eye-catching research and market zeitgeist. Breaking news and dramatic market moves will continue to be alerted to all clients and we will continue to provide a short opening story and comprehensive closing reports.

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Mike Dolan, Markets Editor EMEA.

(Additional reporting by Sudip Kar-Gupta; Editing by Alison Williams)