DAX outperforms as European shares rebound from 2-week drop

* FTSEurofirst 300 closes up 1.3 pct at 1,323.12 points

* Index had fallen 7 pct in last 2 weeks

* Germany's DAX outperforms with 1.9 pct bounce

* Euro STOXX 50 closes up 1.4 pct at 3,047.56 points

* High risk of Russia intervening in Ukraine -NATO head

By Sudip Kar-Gupta

LONDON, Aug 11 (Reuters) - European shares rebounded on

Monday from a two-week drop, with the German DAX market

outperforming, after investors concluded Russia would not send

troops into Ukraine any time soon.

Clashes continued between Ukrainian forces and pro-Russian

separatists, and NATO's chief said on Monday that there was a

"high probability" of Russia intervening militarily, yet traders

said Moscow was still likely to try and de-escalate the crisis.

"The Ukraine situation appears to be stabilising. European

shares took a big beating over the last couple of weeks, so

we're seeing a relief rally," said Ion-Marc Valahu, a fund

manager at Geneva-based firm Clairinvest.

The pan-European FTSEurofirst 300 index, which had

fallen some 7 percent over the last two weeks, closed up 1.3

percent at 1,323.12 points.

The euro zone's blue-chip Euro STOXX 50 index

also rose 1.4 percent to 3,047.56 points, while Germany's DAX

outperformed with a 1.9 percent advance.

Worries about the impact of Western sanctions on Russia had

pushed the DAX down by around 11 percent from a record high of

10,050.98 points in late June, since many top German companies

have significant business ties to Russia.

"I went long on the Euro STOXX and the DAX at the end of

last week," said Valahu, referring to positions betting on

future gains.

RALLY COULD BE FRAGILE

With the situation on the ground in Ukraine remaining

uncertain, any relief rally could be fragile.

Ukrainian forces were poised to recapture the city of

Donetsk from separatists, and U.S. President Barack Obama and

German Chancellor Angela Merkel agreed that any Russian

intervention in Ukraine - even for 'humanitarian' reasons -

would provoke additional consequences.

"The 10 percent correction in Europe has brought some nice

buying opportunities, and the market was clearly oversold on

Friday. But this is mostly a technical bounce, which should last

just a few days," said Arnaud Scarpaci, fund manager at

Paris-based Montaigne Capital.

Euro zone banking shares - recently hit by the bailout of

Portugal's Banco Espirito Santo - featured among the

top gainers on Monday. Italy's fourth-biggest bank, Banco

Popolare, rose 8.2 percent after

stronger-than-expected quarterly results.

(Additional reporting by Blaise Robinson; Editing by Larry

King, John Stonestreet and Crispian Balmer)