* FTSEurofirst 300 up 1.3 pct
* Traders cite oversold levels, lack of liquidity
* Sainsbury's gains after reporting sales figures
* Tech shares fall as Cap Gemini and AMS slip (Updates with German spokesman on Greece)
By Atul Prakash and Lionel Laurent
LONDON, June 10 (Reuters) - European shares snapped a six-day losing streak on Wednesday, with German equities rebounding from their lowest level since February as traders said the recent sell-off had gone too far.
Traders also cited a Bloomberg report that suggested Germany might be considering a staggered deal on aid to Greece.
In response to the report, a German government spokesman said Germany would only accept a cash-for-reform deal between Greece and its international creditors that had the approval of all three lending instutions.
Stocks have taken a hit from recent wild swings in fixed-income markets. German bund yields rose above 1 percent on Wednesday for the first time since September, just months after the European Central Bank began a bond-buying plan to revive growth in the euro zone economy.
The FTSEurofirst 300 index closed up 1.7 percent, its biggest one-day gain since early May, with all top industry sectors in positive territory. Traders pointed to a still-favourable economic and earnings backdrop for equities despite the sell-off.
"Europe is not exactly cheap on an absolute basis but relative to other regions it remains attractive ... Corporates have cash on the balance sheet," said Natixis Asset Management's head of European equities, Yves Maillot. He said that the volatility had seen investors cut back stocks in favour of cash.
The relative strength index (RSI) for the FTSEurofirst 300 index was hovering close to 30 -- a technically "oversold" condition that often results in a bounce-back.
The German DAX index rose 2.4 percent, almost erasing the past week's losses but still leaving it down 9 percent since April highs.
"The correction in the DAX was so strong that at some point buyers were poised to come in ... Liquidity is not good, so it doesn't take a lot of buy interest to move the market this way," said Claus Mose, a Luxembourg-based trader at Sparinvest.
British supermarket Sainsbury's was up 4.5 percent after reporting sales figures in line with the consensus forecast.
"There are some signs that future progress may be possible in non-food areas such as clothing, general merchandising and financial services," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.
Shares in Asian-focused bank Standard Chartered rose 5.8 percent, with traders saying one reason for the rise was the possibility that Finance Minister George Osborne might tweak Britain's bank levy in a speech later on Wednesday.
IT services firm Cap Gemini underperformed after it raised 505.8 million euros ($570.7 million).
AMS slumped 21 percent following a report in Swiss newspaper Finanz und Wirtschaft that the sensor manufacturer had lost a key contract with Apple. AMS said later it was not in a position to comment on a specific customer relationship but was convinced of its strong market position.
Among other movers, Weir Group shares dropped 0.4 percent after the Scottish industrial engineering company said the second quarter was proving to be very challenging for its oil & gas division. (Editing by Mark Heinrich)