* Pan-European FTSEurofirst 300 index up 0.1 pct
* Mining and auto shares among top gainers
* SABMiller pares gains as new InBev offer rejected
* Airlines down on stronger crude oil prices
By Danilo Masoni
MILAN, Oct 7 (Reuters) - European shares ended slightly higher on Wednesday, giving up earlier gains as a three-day rally appeared to lose momentum, but gains among miners and autos offset a decline in airline stocks.
The pan-European FTSEurofirst 300 index pared gains in the last stretch of the session to end up 0.12 percent. The index had earlier gained more than 1 percent to touch its highest level in about one month.
One trader said morning losses at Wall Street weighed on European shares while short covering appeared to have come to an end with global economic concerns emerging again. Some investors still expect loose monetary policies to help the rally continue, in spite of weak economic data, but do not rule out profit taking.
"The macro picture gives no reason to either buy or sell stocks, but given the low bond yields, there are few investment alternatives to equities," said Riccardo Ambrosetti, chairman of Italy's Ambrosetti Asset Management.
Low valuations and benign monetary policies should help sustain the rebound through the quarter, Ambrosetti said. "This is our main scenario, although we don't rule out that some profit-taking could kick in (for) the short term."
According to a Reuters poll of investors, European stock markets will rise until the end of 2015 but will not regain their peaks from earlier in the year. The poll points to the Euro STOXX 50 index, which on Wednesday edged up 0.2 percent, rising further to 3,400 points.
Mining companies were the leading sector, crowning a seven-day rally a 5.2 percent jump. Morgan Stanley upgraded mining shares to "attractive" from "in-line". It also upgraded Rio Tinto, BHP Billiton and Anglo American .
According to Lorne Baring, managing director of B Capital Wealth Management, commodity shares probably reached a floor in late September and have a base to advance further. Even so, owning mining stocks still presents elevated risk.
The energy index rose 2.7 percent, reducing gains after a report showed U.S. crude stocks rose more than expected last week.
Airline stocks were among the leading losers after Credit Suisse cut the sector to "equal-weight" from "overweight". In the sector, initially hit by the oil price rally, IAG, easyJet and Ryanair fell more than 5 percent.
Shares in SABMiller edged up 0.3 percent, reducing earlier gains after the world's No. 2 brewer rejected an improved $104 billion offer from bigger rival Anheuser-Busch InBev as too low.
Britain's biggest supermarket, Tesco, gained 2.5 percent, reversing initial losses. It had reported a 55 percent slump in first-half profits but said it was trading ahead of expectations.
In a positive auto sector, Volkswagen rose 7.1 percent, up for a third straight day. The German group said on Wednesday it would take time to get to the bottom of its rigging of diesel emissions tests while German Chancellor Angela Merkel said she believed Volkswagen was doing its best to address its problems.
Spanish engineering firm Tecnicas Reunidas fell 5.6 percent. A broker said the stock was hit by a report saying the oil minister of Kuwait had ordered an indefinite delay in signing a multi-billion contract for the Al Zour refinery.
Today's European research round-up (Additional reporting by Atul Prakash in London; editing by Larry King/Ruth Pitchford)