European stocks flat; banks up, pharmas down

* FTSEurofirst 300 flat, hovers near 15-mth high

* Pharma stocks drop after France cancels flu shot orders

* Banks up on reports Barclays may raise guidance

* For up-to-the-minute market news, click on [STXNEWS/EU]

By Brian Gorman

LONDON, Jan 5 (Reuters) - European shares were flat at midday on Tuesday, close to a 15-month high, with Barclays (BARC.L) leading banks higher on reports it could lift its outlook, but weaker pharmaceutical stocks offset gains.

At 1151 GMT, the FTSEurofirst 300 index of top European shares was up 0.02 percent at 1,060.97 points.

The index surged 1.4 percent on Monday, its first session of the year, to close at its highest since October 2008, as upbeat U.S. economic data helped the market extend its 26 percent rally of 2009. It is up more than 64 percent from its lifetime low of March 9, 2009.

"Markets are moving sideways waiting to see what the U.S. will do today," said Heino Ruland, strategist at Ruland Research, in Frankfurt. "The U.S. data yesterday boosted confidence on the global economy."

He said a further rally was dependent on the exit strategies of central banks worldwide, which have cut interest rates and implemented stimulus programmes.

Banks .SX7P, up more than 160 percent from the March low, added the most points to the index.Barclays (BARC.L) was up 5.2 percent on market talk the British bank could raise its outlook. It declined to comment.

Royal Bank of Scotland (RBS.L) was up 8.1 percent, having gained 9.9 percent on Monday. Banco Santander (SAN.MC), Credit Suisse (CSGN.VX), Deutsche Bank (DBKGn.DE) and HSBC (HSBA.L) rose between 1 percent and 2.5 percent.

Pharma shares featured among the biggest losers, hit by news France cancelled 50 million doses of H1N1 flu shots it had ordered to combat the virus.

France had ordered the shots from Sanofi-Pasteur, a unit of Sanofi-Aventis (SASY.PA), GlaxoSmithKline (GSK.L), Novartis (NOVN.VX) and Baxter International (BAX.N). But a Sanofi Pasteur spokesman said the impact on sales would be minimal.

"We don't expect this change in the French order to impact sales as the freed number of doses will be reallocated to other countries which are looking for H1N1 vaccines," he said.

Sanofi-Aventis shares dropped 1.4 percent, while GlaxoSmithKline stock lost 2.1 percent. Novartis was down 1.8 percent, also hit by a share offer to buy out minority Alcon ACL.N shareholders that would lead to dilution.

Around Europe, Britain's FTSE 100 index .FTSE was up 0.5 percent, Germany's DAX index .GDAXI was down 0.1 percent, and France's CAC 40 .FCHI was flat.

RETAILERS FALL

British retailer Next (NXT.L) dropped 3 percent after the fashion chain said 2010-11 profit could be flat, even as it upgraded 2009-10 forecasts after a solid Christmas. [ID:nLDE6040LJ]

Other retailers fell, notably Marks & Spencer (MKS.L), down 2 percent ahead of a trading update on Wednesday.

Cadbury CBRY.L fell 1.8 percent. Nestle (NESN.VX) said it has no intention to bid for Cadbury, ending speculation over one potential suitor for the British chocolatier, while Kraft Foods KFT.L raised the cash portion of its hostile 10.2 billion pound ($16.4 billion) bid for Cadbury, funded by a deal to sell its North American pizza unit to Nestle for $3.7 billion.

"Nestle's decision effectively leaves Kraft as the overwhelming frontrunner," brokerage Charles Stanley said in a note. It has a 'reduce' rating on Cadbury.

Nestle was down 0.6 percent.

Telecom Italia (TLIT.MI) rose 1.8 percent after a newspaper reported Spanish peer Telefonica (TEF.MC) could increase its stake in Telco which controls 23.6 percent of the Italian telecoms group. Telefonica was down 0.1 percent.

Data suggested economic recovery was continuing. German unemployment fell for the sixth consecutive month in December as statistical changes and government measures to prevent lay-offs continued to support the labour market. [ID:nLDE6040P9]

Investors braced for key U.S. data on Tuesday, including monthly factory orders, pending home sales, and car sales, ahead of all-important monthly jobs data due later in the week. (Additional reporting by Blaise Robinson; Editing by Dan Lalor) ($1 = 0.6208 pound)