Nokia sale boosts European shares to 1-week high

* FTSEurofirst 300 index rises 0.2 percent

* Nokia (Stockholm: NOKI-SEK.ST - news) surges on Microsoft (NasdaqGS: MSFT - news) 's move to buy phone business

* Syrian tensions keep gains in check

By Atul Prakash

LONDON, Sept 3 (Reuters) - A 40 percent surge in Nokia (Xetra: 870737 - news)

boosted technology shares on Tuesday, helping

European equities to a one-week high after Microsoft

said it would buy the Finnish company's phone business.

The STOXX Europe 600 Technology index rose 2.9

percent after the 5.44 billion euro ($7.2 billion) deal.

"We are in an environment of growing merger fantasy for sure

as economic conditions are improving, companies are cash-rich

and interest rates are very low," Christian Stocker, equity

strategist at UniCredit (Milan: UCG.MI - news) in Munich, said.

"I see more mega deals taking place in the fourth quarter."

The Nokia transaction followed Verizon Communications'

move on Monday to buy Vodafone (LSE: VOD.L - news) out of their U.S.

wireless business for $130 billion.

The scale of Nokia's gains was fuelled by the large number

of investors who had the firm's shares to sell in the hope of

more price falls, but who were then forced to buy them back

after the deal to limit losses. Markit data showed that of the

shares available to be borrowed, 66 percent were out on loan.

The deal marks the exit of the 150-year-old company from the

global cellphone market it once dominated. Its current market

capitalisation of roughly $15 billion is a fraction of the peak

of around $250 billion it reached in 1999-2000 during the height

of the tech sector boom.

Mirabaud Securities analyst Susan Anthony said Nokia should

be able to resist a full takeover attempt, as Finland would not

be keen to see one of its national champions disappear.

"Nokia should be able to stand on its own two feet, now that

it's more focused, profitable and cash-generative."

The transaction drove gains in the FTSEurofirst 300

index of top European shares, which at 1037 GMT was up 0.2

percent at 1,219.62 points.

Gains were capped by reports saying Russian radar detected

the launch of two ballistic "objects" towards the eastern

Mediterranean, adding to investor jitters about the Syrian

crisis.

The index saw a choppy morning session, falling as much as

0.7 percent after the reports, having earlier risen to 1,220.88,

its highest level in a week.

Shares have risen recently on expectations a strike against

Syria could be delayed for at least a week as the U.S.

administration had yet to persuade Congress to back its

plans.

"If there is an escalation of tension, then one can expect

to see a big degree of risk off in the market," IG (LSE: IGG.L - news) analyst

Brenda Kelly said.