* FTSEurofirst 300 up 0.3 percent
* Auto sector top sectoral gainer, VW turns higher
* TeliaSonera drops 3 pct after newspaper report
* Bouygues rises after defending standalone strategy
By Alistair Smout and Danilo Masoni
LONDON/MILAN, Oct 6 (Reuters) - European shares edged higher on Tuesday, extending strong gains in the previous session, with sentiment helped by expectations central banks in Europe and the U.S. will keep an equity-friendly monetary policy in the coming months.
The pan-European FTSEurofirst 300 rose 0.3 percent and the euro zone's blue-chip Euro STOXX 50 was up 0.2 percent. European shares had opened lower as some investors took profit following gains in the previous session which saw the FTSEurofirst 300 mark its biggest one-day rise since August.
"No doubt overall sentiment has improved over the past few days as uncertainty regarding an imminent US rate hike has been removed for now," said Peregrine & Black trader Markus Huber. "Firmer markets towards the end of the day would certainly confirm that the 'Bulls' are slowly gaining the upper hand again."
Concerns over the repercussions of an economic slowdown in China and uncertainty over when the U.S. Federal Reserve will end a decade of easing policies had driven European shares to nine-month lows at the end of last quarter. Now some investors think the sell off is overdone and believe European shares are well positioned to benefit from a rebound.
"We would buy Europe ex UK and Japan into this sell-off. Both have reasonable EPS momentum and should receive further support from their respective central banks," Citi said in its global equity quarterly eport.
On Tuesday data showed that industrial orders in Germany, Europe's largest economy, dropped mainly because demand from non-euro zone countries weakened.
The weaker data should ultimately mean that the European Central Bank maintains its ultra-easy monetary policy, according to Joe Rundle, head of trading at ETX Capital.
The auto sector, which has been pressured recently by a emissions tests rigging scandal at Volkswagen, was the top sectoral gainer with a rise of 1.6 percent. Other sectors were higher but gains were below 1 percent.
Volkswagen rose 2 percent. The stock had initially declined around 3 percent after Handelsblatt reported that the car maker had admitted 8 million vehicles were fitted with software capable of cheating diesel emissions tests in the European Union. Its sales in South Korea also fell.
Mining and trading giant Glencore was among the top fallers in Europe. It fell 3.3 percent after surging 21 percent in the previous session, its best daily gain ever.
Hopes of asset sales and comments that output cuts would lift copper prices helped to support Glencore's shares on Monday, but a fresh target price cut by HSBC suggested that recent volatility could prevail in the near term.
Shares in TeliaSonera fell 2.9 percent. A newspaper reported that U.S. authorities may seek damages as high as 8 billion Swedish crowns ($961 million) from the Swedish telecoms operator in relation to an investigation of alleged corruption in Uzbekistan.
Bouygues Telecom rose 4 percent. France's third-largest mobile operator said it aimed to improve its profit margins and sales in coming years as it defends its standalone strategy.
Brewer SABMiller fell 3 percent following a Bloomberg report saying the brewer was said to have rejected an informal takeover offer from ABInBev as too low.
Today's European research round-up (Editing by Keith Weir)