* FTSEurofirst 300 up 0.1 pct, Euro STOXX 50 down 0.1 pct
* Airline stocks rise as Ryanair lifts outlook
* Half way into Europe's earning season, profits up 8.9 pct
By Blaise Robinson
PARIS, Nov 3 (Reuters) - European stocks were steady in morning trade on Monday, taking a breather after last week's sharp gains, while Ryanair soared after raising its profit outlook.
Shares in the low-cost airline climbed 8.8 percent after it lifted its annual profit forecast almost 20 percent on a surge in winter bookings and said it would slash fares by up to 10 percent in the new year to steal more market share from struggling higher-cost rivals.
The upbeat outlook boosted the shares of rivals, with easyJet up 2.7 percent, Air France-KLM up 2.8 percent, and IAG up 1.3 percent.
Shares in Publicis fell as much as 5.6 percent after the world's third-largest advertising agency unveiled an all-cash friendly takeover offer for U.S. digital ad specialist Sapient for $3.7 billion.
"The price looks expensive, with a premium of 44 percent. Publicis's 5-10 percent cash-back policy to investors will potentially be put on hold," a Paris-based trader said.
At 0855 GMT, the FTSEurofirst 300 index of top European shares was up 0.1 percent at 1,353.85 points. The benchmark index gained 1.8 percent on Friday, after the Bank of Japan surprised global financial markets by ramping up its stimulus spending.
"While stocks surged on Friday, implied volatility barely moved down, which means that there are still a lot of question marks. Investors are not completely reassured, and visibility is very poor," said Jean-Louis Cussac, head of Paris-based firm Perceval Finance.
"This is a market for hedge funds: speculation, arbitrage, algo-trading, while the flows from real buy-and-hold investors remain thin."
Around Europe, UK's FTSE 100 index was flat, Germany's DAX index down 0.1 percent, and France's CAC 40 down 0.2 percent.
Milan's MIB index underperformed, down 0.6 percent. National statistics office ISTAT forecast on Monday Italy's economy will contract by 0.3 percent this year, in line with the government's most recent forecast, and grow by a weak 0.5 percent in 2015.
Also on the macro front, disappointing surveys out of China's manufacturing and services sectors weighed on investor sentiment. Data showed China's economy lost further momentum heading into the fourth quarter as a cooling property market weighed on activity and export demand softened.
"The optimism created by the Bank of Japan by increasing their purchase of quantitative assets has been hit by the Chinese manufacturing data released today, which fell well short of expectations," Naeem Aslam, chief market analyst at Ava Trade, said.
"This was a reminder to investors that the problems of growth are still very sturdy for the second biggest economy of the world."
Shares in Swiss building materials group Holcim fell 1.5 percent after posting a drop in quarterly sales and profits on Monday, citing a challenging environment in Europe as recovery prospects dimmed and growth in Germany and France slowed.
HSBC Holdings fell 0.6 percent. Europe's biggest bank set aside $378 million to pay a potential fine from the UK regulator for alleged manipulation of currency markets, as it reported a 12 percent fall in underlying earnings after costs rose.
Half way into the earnings season, 67 percent of companies managed to meet or beat profit forecasts, and 58 percent met or beat revenue forecasts, according to Thomson Reuters StarMine data. In absolute terms, profits are up 8.9 percent, while revenues are down 0.5 percent, highlighting the fact that Europe's earnings rebound has mostly been coming from cost-cutting and lower financing costs.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
Editing by Janet Lawrence