European shares bounce back on China stimulus talk

* FTSEurofirst 300 rises 0.7 pct

* Miners gain most on China stimulus talk

* easyJet gains after upgrading first half outlook

By Atul Prakash

LONDON, March 25 (Reuters) - European shares advanced in cautious trading on Tuesday on expectations that recent disappointing data from China might prompt the country to launch new stimulus measures to maintain the pace of economic growth.

Encouraging updates from companies such as Europe's largest home improvements retailer Kingfisher (LSE: KGF.L - news) and British budget airline easyJet also improved market sentiment.

The biggest sectoral gainers were basic resources stocks , which rose 1.3 percent, with analysts saying that any monetary easing by the world's No. 1 metals consumer would support metal prices as well as improving mining sector profits.

"The stimulus talk is around and could certainly help markets to recover. If we see any relaxation on the monetary front, then this could mean that we see some relief in the commodity space," Gerhard Schwarz, head of equity strategy at Baader Bank (Xetra: BWB.DE - news) , said.

"We saw cyclical sectors underperforming over the last couple of weeks and any kind of stimulus will certainly help the cyclical sectors more."

Global diversified miners Rio Tinto (Xetra: 855018 - news) and BHP Billiton (NYSE: BBL - news) rose 2.1 percent and 1.6 percent respectively, while Anglo American (LSE: AAL.L - news) rose 1.9 percent.

Miners helped the FTSEurofirst 300 index of top European shares to gain 0.7 percent to 1,302.68 points by 0840 GMT after falling more than 1 percent in the previous session.

However, investors stayed cautious in trading as geopolitical tension between Russia and the West persisted.

U.S. President Barack Obama and major industrialised allies warned Russia on Monday it faced damaging economic sanctions if President Vladimir Putin takes further action to destabilise Ukraine following the seizure of Crimea.

A survey showed on Tuesday German business morale fell for the first time in five months in March as companies in Europe's largest economy worry about the effects of the Ukraine crisis.

Among individual movers, easyJet rose 4.5 percent to be the top gainer in the FTSEurofirst, after upgrading its first-half outlook by 25 percent due to tight cost control and the popularity of its allocated seating programme.

And Kingfisher was up 3.2 percent after saying it will return about 200 million pounds to shareholders this year after meeting forecasts with a 4.1 percent rise in 2013-14 profit.

Europe bourses in 2014: http://link.reuters.com/pad95v

Asset performance in 2014: http://link.reuters.com/rav46v

Today's European research round-up (Editing by Louise Ireland)