(Reuters) - European shares steadied on Thursday in low volume as investors remained wary after Italian 10-year bond yields stayed near 7 percent, deemed by many analysts as unsustainable, following a disappointing debt auction.

But bargain hunting in cyclical miners gave the market some support as investors were tempted to buy after the sector posted sharp falls in the previous session.

The STOXX Europe 600 Basic Resources index was up 0.3 percent to feature among the best performers, after falling 1.9 percent in the previous session.

Trade was choppy with European stocks moving in and out of negative and positive territories due to low volumes distorting market movements.

Although Italy bond yields fell from recent record highs at the debt auction, investors were little impressed as yields on 10-year paper were stuck near 7 percent -- above the level where other euro zone governments have been forced to seek bailouts.

Banks which have high exposure to euro zone peripheral debt were among the worst performers on concerns about the high funding costs.

French banks Credit Agricole and Societe Generale , which have large exposures to Italian debt, were down 0.6 percent and 0.5 percent respectively to feature among the biggest losers on the French CAC index.

WEEKS AND MONTHS

I see little reason for Italian bond yields to come down for some time because it will take weeks and months to get any sort of progress from the austerity measures, Howard Wheeldon, senior strategist at BGC Partners, said.

Markets are short of patience and there is no reason to be positive, the higher the yields the higher the potential for problems.

Although an injection of cheaper funding by the European Central Bank, and government austerity measures, have eased pressures on Italian shorter-term debt, longer-dated bonds are still a challenge and there are worries about Italy's refinancing hurdles next year.

The ECB three-year funding has been a great thing as it has brought a lot of stability to the system and the market, Andrea Williams, manager of Royal London Asset Management's European Income fund, said.

But there is still concern about the first quarter, when a massive amount of Italian bonds need to be refinanced. We are underweight financials.

By 1150 GMT, the pan-European FTSEurofirst 300 .FTEU3 index of top shares was up 0.1 percent at 984.72 points, after being as low as 981.22, but volume was only 12.9 percent of its 90-day daily average.

The index was trading between a key resistance level, a 23.6 percent Fibonacci Retracement at 987.07 from its September to October rally, and a support level formed by its 38.2 percent retracement of the same rally at 961.45 points.