European shares end higher led by auto, oil stocks

(Adds closing prices)

* FTSEurofirst 300 up 0.65 percent at two-week highs

* Auto sector among top gainers led by Renault (Swiss: RNO.SW - news)

* Jump in crude oil prices lifts sector stocks

* SABMiller (Xetra: BRW1.DE - news) drops on reported rejection of InBev offer

By Danilo Masoni

MILAN, Oct (HKSE: 3366-OL.HK - news) 6 (Reuters) - European shares closed higher on Tuesday, led by auto and oil sector stocks and helped by expectations central banks in Europe and the United States will maintain an equity-friendly monetary policy.

The pan-European FTSEurofirst 300 rose 0.65 percent, adding to strong gains in the previous session, to trade around two-week highs, while the euro zone's blue-chip Euro STOXX 50 climbed 0.93 percent.

"No doubt overall sentiment has improved over the past few days as uncertainty regarding an imminent U.S (Other OTC: UBGXF - news) . rate hike has been removed for now," said Peregrine & Black trader Markus Huber.

"Firmer markets towards the end of the day would certainly confirm that the 'Bulls' are slowly gaining the upper hand again."

Concerns over the repercussions of an economic slowdown in China and uncertainty over when the U.S. Federal Reserve will end a decade of easing policies had driven European shares to nine-month lows at the end of last quarter. Now (NYSE: DNOW - news) some investors think the sell-off is overdone.

"We would buy Europe ex UK and Japan into this sell-off. Both have reasonable earnings per share momentum and should receive further support from their respective central banks," Citi said in its global equity quarterly report.

On Tuesday data showed that industrial orders in Germany, Europe's largest economy, dropped mainly because demand from non-euro zone countries weakened.

The weaker data should ultimately mean that the European Central Bank maintains its ultra-easy monetary policy, according to Joe Rundle, head of trading at ETX Capital.

The auto sector, hurt by an emission test rigging scandal at Volkswagen (Other OTC: VLKAF - news) , was among the top sectoral gainers with a rise of 2.1 percent.

Renault rose 5.75 percent on speculation about potential developments in the French carmaker's alliance with Japanese partner Nissan. A source close to the matter said Renault would hold a board meeting on Tuesday to discuss the alliance.

Volkswagen rose 3.8 percent after its new CEO warned staff to brace for "massive cutbacks" in response to the scandal. The stock had initially declined around 3 percent after reports that the car maker had admitted 8 million vehicles were fitted with software capable of cheating emissions tests in the European Union. Its sales in South Korea also fell.

Oil stocks rose 2.9 percent as the crude benchmark Brent returned to above $50 a barrel after a U.S. forecast showed tighter oil supplies next year, while Russia, Saudi Arabia and other big producers hinted at further talks to support the market.

Mining and trading giant Glencore (Xetra: A1JAGV - news) rose 2.5 percent after a volatile day and following a 21 percent jump in the previous session, its best daily gain ever. Hopes of asset sales and comments that output cuts would lift copper prices helped to support Glencore's shares on Monday, but a fresh target price cut by HSBC suggested that recent volatility could prevail in the near term.

Brewer SABMiller fell 3.7 percent following a Bloomberg report that the brewer was said to have rejected an informal takeover offer from ABInBev as too low.

Bouygues Telecom rose 3.6 percent. France's third-largest mobile operator said it aimed to improve its profit margins and sales in coming years as it defends its standalone strategy.

Shares (Berlin: DI6.BE - news) in TeliaSonera (Amsterdam: 1087941.AS - news) fell 2.4 percent. A newspaper reported that U.S. authorities may seek damages as high as 8 billion Swedish crowns ($961 million) from the Swedish telecoms operator in relation to an investigation of alleged corruption in Uzbekistan.

Today's European research round-up (Additional reporting by Alistair Smout in London; Editing by Ruth Pitchford)