* FTSEurofirst 300 index up 0.4 pct
* Mining and telecoms stocks among top gainers
* Next shares fall after trading update (Adds detail, updates prices)
By Danilo Masoni and Atul Prakash
MILAN/LONDON, Jan 5 (Reuters) - European shares were higher in volatile trade on Tuesday, supported by a rally in mining and telecoms stocks, though worries over China persisted a day after poor Chinese factory data triggered a global stocks sell-off.
Vague market talk that the European Central Bank might do more to stimulate the euro zone's economy after weaker than expected inflation data for December was also cited by traders as a supporting factor.
The pan-European FTSEurofirst 300 index was up 0.4 percent by 1534 GMT, having fallen 2.5 percent on Monday as a 7 percent decline in Chinese markets sent it to its biggest one-day drop since early December.
The heavyweight German index DAX, however, remained in negative territory, down 0.04 percent, emphasising the fragility of market sentiment.
"Short-term uncertainty continues and stocks could reach new lows in the next few weeks, possibly creating some interesting buying opportunities," said Alessandro Allegri, CEO of Italian asset manager Ambrosetti Asset Management.
"The main reason for the uncertainty is China, given that company numbers and the macroeconomic picture in Europe and the U.S. have not changed."
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 CSI300 index of the largest listed companies in Shanghai and Shenzhen closed 0.3 percent higher on Tuesday.
The STOXX Europe 600 Basic Resources index rose 1.5 percent, the top sectoral gainer, as prices of key industrial metals rose after slumping in the previous session. Anglo American, BHP Billiton and Glencore were up by between 1.6 percent and 4.4 percent.
Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said the market was gaining some support from the potential for further M&A activity in the telecoms sector.
"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," Gijsels said.
Telecoms stocks outperformed after Orange confirmed it was in renewed talks about a merger with rival Bouygues Telecom. Bouygues rose 0.5 percent, Altice climbed 9 percent and Numericable surged 10.8 percent. Orange was also up 0.6 percent.
British clothing retailer Next fell 4.7 percent after a disappointing sales performance in the run-up to Christmas. It blamed unusually warm weather in November and December, poor stock availability and increased online competition. (Editing by Richard Balmforth and David Goodman)