Autos and miners help European shares to rise further

* Pan-European FTSEurofirst 300 gains for 2nd day

* Monte dei Paschi (Milan: BMPS.MI - news) surges on report of rescue plan

* Automobile stocks gain on positive Kepler note

By Sudip Kar-Gupta and Atul Prakash

LONDON, March 14 (Reuters) - European equities extended gains on Monday, with auto shares propelled by a positive outlook for the sector and miners helped by a steadying of copper prices below four-month highs.

The European mining index rose 1.6 percent, the top gainer in the pan-European FTSEurofirst 300 index after data from China at the weekend and comments by a top regulator soothed worries over both the health of the world's second-biggest economy and the outlook for metals demand.

However, Nomura analysts stayed cautious on the sector, saying that although miners were taking the right steps to reposition their business models for the current downturn, their initiatives did not justify the current rebound for the sector.

The STOXX Europe 600 Automobiles and Parts index rose 1.3 percent following a positive note from Kepler Cheuvreux, which upgraded its stance on companies such as Daimler (LSE: 0NXX.L - news) , Peugeot (Other OTC: PUGOF - news) , BMW (Swiss: BMW.SW - news) and Continental (Swiss: CONT.SW - news) .

"Demand so far this year has been better than expected in Europe, while volumes in the U.S (Other OTC: UBGXF - news) . and China continue to hold up well. FY 2015 results have also been strong overall, resulting in positive relative earnings momentum for the sector and taking valuation multiples down sharply," they said.

The FTSEurofirst 300, which climbed 2.7 percent on Friday, was up 0.6 percent in afternoon trading, while the euro zone's blue-chip Euro STOXX 50 index advanced 0.5 percent.

Germany's DAX rose 1.4 percent after briefly climbing back over the 10,000 point mark - a key level for many technical traders - for the first time since January.

Italian banks also supported the market. Monte dei Paschi di Siena rose 8 percent, with traders citing speculation that state holding Cassa Depositi e Prestiti (CDP) might intervene in a government-sponsored rescue of the troubled Italian bank. Shares (Berlin: DI6.BE - news) in Carige rose 3 percent, while Banco Popolare (Amsterdam: PB8.AS - news) gained 2 percent.

Analysts said that banks in the so-called "peripheral" nations of Italy, Spain and Portugal were continuing to rally on the ECB's plans for a new round of cheap funding for the sector.

"We believe there is enough value in the sector for continued performance on central bank stimulus - with peripheral banks likely to lead the way," RBC (Other OTC: RBCI - news) analyst Robert Noble said.

In spite of the rebound from the end of last week, the FTSEurofirst remains down by around 5 percent since the start of 2016, with world stock markets having been impacted by concerns about a global economic slowdown. (Additional reporting by Atul Prakash; Editing by Gareth Jones)