European shares reduce gains, Altice leads telecoms lower

* FTSEurofirst 300 up 0.5 pct, Euro STOXX 50 little changed

* Altice (Other OTC: ATSVF - news) leads telecoms lower after capital raising move

* Trading remains volatile with Glencore (Xetra: A1JAGV - news) , VW turning lower

By Sudip Kar-Gupta and Danilo Masoni

LONDON, Oct (HKSE: 3366-OL.HK - news) 1 (Reuters) - European shares gave up some ground by midday on Thursday as gains by oil and gas stocks were offset by a fall in telecoms and both Glencore and Volkswagen (Other OTC: VLKAF - news) turned lower.

European stocks had been supported by rising Asian and U.S (Other OTC: UBGXF - news) . equities, with some traders viewing more weak Chinese data as a sign that Beijing may do more to bolster the country's economy.

But shares in Altice fell 8.5 percent after the telecoms group announced a capital increase to help fund its takeover of Cablevision. Deutsche Telekom lost 2.5 percent and Telecom Italia (Other OTC: TIAJF - news) was down 3 percent, both helping drag down their national blue-chip indexes.

The pan-European FTSEurofirst 300 index rose 0.47 percent. The euro zone's blue-chip Euro STOXX 50 index was flat. Germany's DAX fell 0.43 percent.

European markets have lost ground in recent months, hit by a slowdown in China. The FTSEurofirst fell nearly 10 percent in the last quarter and the DAX is some 20 percent below a record high set in April (LSE: 0N69.L - news) .

Chinese manufacturing activity shrank again in September as demand softened at home and abroad. But oil and metals prices rose as traders said the weak data from China would reinforce the need for Beijing to introduce more economic stimulus.

"It (Other OTC: ITGL - news) is still pretty gloomy with regards to China, but I think we're still in a 'Goldilocks' environment. We still have supportive monetary policy around the world," said Logic Investments' Harry Shann.

Oil companies were the biggest gainer, advancing 2.52 percent rise as the price of crude rose.

The market remained volatile, though. Concern remained that a slowdown in emerging markets could have global repercussions, clouding the outlook for equities.

"Events in the last few weeks have convinced us stock markets firmly remain in a negative phase," broker Equita said in a note.

Glencore, whose shares have been hit this week by questions over its debt situation, fell 2.9 percent. The stock had rallied earlier on upbeat broker notes from Citigroup (NYSE: C - news) and Barclays (LSE: BARC.L - news) .

Volkswagen shares fell 1.5 percent, giving up initial gains. Sources told Reuters the carmaker's supervisory board is considering steps to prop up its credit rating amid a scandal over rigging emissions tests.

Fiat (Hanover: FIA1.HA - news) rose 3.1 percent as brokers expressed confidence over a planned stock market listing of Fiat's Ferrari brand.

Today's European research round-up (Additional reporting by Danilo Masoni, editing by Larry King)