* FTSEurofirst 300 index rises 0.6 percent
* Mining, telecom stocks among top gainers
* Next shares fall after trading update
By Atul Prakash
LONDON, Jan 5 (Reuters) - European shares bounced back on Tuesday after a rally in mining and telecom stocks and some stabilisation in Chinese markets, a day after poor Chinese factory data triggered a sharp sell-off that hit world markets.
Chinese regulators leapt to support the country's stock markets early on Tuesday, with the central bank pouring cash into the money market system and the securities regulator suggesting it might restrict share sales by major shareholders.
The securities regulator defended the functioning of the new "circuit breaker" policy that caused Chinese stock markets to suspend trade on Monday after markets fell 7 percent, triggering the mechanism on the very first day it came into effect.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen closed 0.3 percent higher on Tuesday.
"Chinese markets managed to stabilise on hopes that the central bank and the authorities will take measures to support economic growth. And they have quite a bit of weaponry in their arsenal like lowering the reserve requirements and cutting interest rates," Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.
Gijsels said the market was also getting support from the telecom sector, which has seen several mergers and acquisitions.
"More deals are likely to come as companies look for synergies and cost efficiencies. This is an additional bonus for a relatively defensive sector in the current market environment."
Telecoms stocks outperformed, after telecom operator Orange confirmed it was in renewed preliminary talks about a merger with rival Bouygues Telecom. Bouygues rose 2.7 percent, Altice climbed 3 percent and Numericable surged 5.7 percent. Orange was also up 1.7 percent.
The pan-European FTSEurofirst 300 index was up 0.6 percent at 1,409.81 points by 0827 GMT after falling 2.5 percent on Monday, its biggest one-day drop since early December.
The STOXX Europe 600 Basic Resources index jumped 2.3 percent, the top sectoral gainer, as prices of key industrial metals rose 1.1 to 1.6 percent after slumping in the previous session. Anglo American, BHP Billiton and Glencore rose 2.7 to 3.1 percent.
However, British clothing retailer Next fell 3 percent after saying its sales performance in the run-up to Christmas was disappointing.
It blamed unusually warm weather in November and December, poor stock availability and increased online competition.
"Next has provided a stark reminder that the situation within retail is precarious," Richard Hunter, head of equities at Hargreaves Lansdown, said.
"There are also somewhat ominous, if unsurprising, comments on the ferocity of competition around its flagship Directory business, which are unsettling. Nonetheless, at a time when investors have been debating whether to prefer online or retail space sales, Next has an established foot in both camps." (Editing by Tom Heneghan)