(Reuters) - European shares rose on Tuesday, bouncing from a steep sell-off in the previous session, though strategists said investors would need to feel more confident about a resolution to the euro zone crisis before the market could break out of a recent range.
German investor confidence data helped to boost gains.
At 1208 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.4 percent at 971.70 points in choppy trade and thin volumes, after posting a 1.9 percent decline on Monday, its biggest fall in three weeks.
The index is down more than 13 percent in 2011, with investors worried about the euro zone crisis, which looks set to push the region into recession. A rally in the run-up to last week's summit of European Union leaders, which announced measures for greater integration and budget discipline, has helped cut losses for the year.
We've had a massive sticking plaster which will prove to be economically relevant (in the longer term) but the damage is done already, plunging Europe into recession, said Steven Bell, a director at hedge fund GLC, which has $680 million under management.
We would need to feel we've reached a turning point in the euro zone sovereign crisis, and that takes time. No (investors) have really got any conviction -- that's been true for months and it's even more true as we approach the end of the year.
Miners were among the stocks to gain having suffered a sharp decline on Monday. The STOXX Europe 600 Basic Resources Index rose 1.2 percent, boosted by Australia lifting its demand forecast for iron ore. Rio Tinto climbed 1.7 percent.
Bell said the actions of ratings agencies would also be key in driving the markets in the short term.
Moody's said it would review ratings of all EU member states in the first quarter of 2012, while rival Fitch said the summit had failed to provide a comprehensive solution to the debt crisis.
On the upside, some strategists pointed to German analyst and investor sentiment rising unexpectedly in December, ending a run of nine monthly declines.
Key technical levels may also be supporting the market. The index stayed above its 50-day moving average of about 966, but may struggle to break through the next key levels, such as 981.9, the 38.2 percent Fibonacci retracement of its fall from the 2011 high in February to its low in September.
The index has been trading in a tight range and yesterday's sell-off was overdone, said Bill McNamara, technical analyst at Charles Stanley.
Traders said any gains would be short-lived, with the outlook for the euro zone grim.
Yesterday's move takes us to a level a little bit more realistic and we might just see the market bounce a little bit, Giles Watts, head of equities at City Index, said.
But I would not read to much in it. There is still nervousness in the market, and unless the move up is backed up with something concrete, investors are likely to take profits later in the day.
Barclays Capital said it saw modest upside potential for European equities in 2012, given a no-growth domestic macro backdrop, leaving corporates dependent on business outside Europe to generate profit growth.