* FTSEurofirst 300 index up 0.17 percent
* Deutsche Bank seen avoiding capital increase, down 0.8 pct
* Auto sector index set for best week since 2011
* Credit Suisse hit by report over planned capital raising
* Telefonica down on reported mobile merger doubts
By Danilo Masoni
MILAN, Oct 8 (Reuters) - European shares were little changed on Thursday, with profit taking across several sectors offset by stronger auto stocks, while Deutsche Bank was volatile after rigorously cleaning up its balance sheet.
The pan-European FTSEurofirst 300 index was up 0.17 percent and the euro zone’s blue-chip Euro STOXX 50 index was down 0.19 percent lower.
After a rally this week that brought indexes off nine-month lows reached at the end of a bruising September, some investors were taking the sidelines before the start of the U.S. earnings season while economic data in Germany and Japan added weight to concerns over global growth.
“Markets will probably tread water a little bit because there is still the possibility of some further disappointment coming from the economic newsflow and there is uncertainty about U.S. earnings,” said Gerhard Schwarz, head of equity strategy at Baader Bank in Munich.
Alcoa will report results after the close, considered the official start to the earnings season.
In Europe, Deutsche Bank shares fell as much as 3.6 percent after it said late on Wednesday that it made a record pre-tax loss of 6 billion euros.
But they recovered and were down 0.8 percent with some analysts arguing that the company’s decision to cut or skip dividend payments would allow it to avoid a capital increase.
Other traders and analysts said Deutsche Bank’s plans to take large writedowns at its investment banking unit made sense as a “kitchen-sink” exercise, covering all contingencies.
“Whenever a company clears everything out in one go, it helps to remove the uncertainty around it. They’ve taken decisive action,” LONTRAD managing director Zeg Choudhry said.
Schwarz said the Deutsche Bank’s measured share price reaction showed how the overall market had gained confidence and become more resilient to negative newsflow.
Auto shares rose 1 percent and were set for their best weekly gain since 2011, as investors turned more optimistic on the sector battered by an emissions scandal at Volkswagen .
Investors are unwinding negative bets on the sector, one trader said, while JPMorgan analysts said the upcoming quarterly results season would be “supportive” for the sector’s stock-price rebound.
Fiat Chrysler rose 3.5 percent on optimism around the listing of its luxury sports car unit Ferrari in the second part of October. A labour deal with U.S. trade unions workers that averted a threatened strike was also seen as positive.
Credit Suisse fell 3.8 percent after the Financial Times said the Swiss bank was preparing to launch a “substantial capital raising” when it unveils its strategy on Oct. 21.
Coloplast fell 4.1 percent, leading losers on the pan-European FTSEurofirst 300 index down after UBS downgraded the Danish healthcare sector company to “sell” from “neutral”, slashing its target price to 375 crowns from 500.
Other stocks such as DNB and Statoil were lower after brokers’ target price cuts.
Spanish phone group Telefonica fell 2 percent in a weaker sector after reports that the head of British regulator Ofcom suggested she has doubts on a planned merger between O2 and Three. Telefonica has agreed to sell O2 to Three.
Today’s European research round-up (Additional reporting by Sudip Kar-Gupta, Alistair Smout and Alasdair Pal in London; Editing by Tom Heneghan)