UPDATE 1-Conti upbeat on 2010 after strong first half

* Q2 final adjusted EBIT 701.4 mln eur, margin 10.6 pct

* H1 consolidated sales rise 40 pct to 12.7 bln eur

* Confirms FY targets set out earlier in July

(Adds background, more details from statement)

FRANKFURT, July 29 (Reuters) - German automotive parts supplier Continental (CONG.DE) posted rising first-half sales and profits on a recovery in global car markets, and reiterated its confident outlook for the full year.

The Hanover-based group confirmed a higher sales forecast for 2010 and reiterated that it expected a significant increase in underlying operating profit this year.

By 0807 GMT, shares in Continental were down 2.10 percent at 47.70 euros, underperforming the Stoxx Europe autos index .SXAP, down 0.49 percent, as concern across the sector over whether sales growth could continue weighed on the stock.

"The whole sector has run up into second quarter reporting, said Credit Suisse's David Arnold. "Nobody cares about first-half reporting now, the question is how does the second half play out. The implications for the second half and 2011 are what everyone wants to understand."

European car markets, buoyed by scrapping incentive schemes and signs of economic recovery in recent months, are expected to be lower year-on-year as the few schemes that have not already finished grind to a halt.

Austerity measures in many markets are also expected to take their toll on car purchases.

Reporting a strong first half on Wednesday, Europe's second-largest carmaker PSA Peugeot Citroen (PEUP.PA) said the second-half would be tougher, sending its shares back from recent gains. [ID:nLDE66Q1GN]

Continental's second quarter numbers were particularly strong, Arnold said, adding that he expected Continental shares would close higher at the end of the day.

Adjusted earnings before interest and tax in the group's automotive division swung back into the black, at 605.2 million euros in the first half, giving a 7.7 percent margin.

That compared with a loss of 110.1 million euros in the year-earlier period.

First-half adjusted earnings before interest and tax (EBIT) rose to 1.3 billion euros for the group as a whole, from 249 million euros in the first half of 2009.

First half group consolidated sales rose 40 percent to 12.7 billion euros.

Early this month, Continental pre-announced results, showing a first-half sales increase of 37 percent to about 12.5 billion euros and adjusted operating profit of at least 1.2 billion euros. [ID:nLDE6610Y8]

At the time, it forecast revenue would rise by about 15 percent this year to nearly 20 billion euros and it would earn before interest and taxes (EBIT) between 8.0 to 8.5 percent of sales on an adjusted basis in 2010, compared with just 5.8 percent last year.

On Thursday it reiterated these forecasts.

Continental then made a successful return to the bond market for the first time in six years, raising 750 million euros in the high-yield market to help lengthen the maturity profile of its some 8 billion euros in debt, virtually all of which comes due in 2012. [ID:nLDE66B06M]

Improvements in its balance sheet and the bond placement meant the group was "tackling the upcoming tasks brimming with confidence," said Chief Executive Elmar Degenhart in a statement.

The company aims to return to investment grade, but the fact it is controlled by heavily indebted bearings maker Schaeffler effectively caps its rating at B1, four notches into junk territory, according to Moody's. [ID:nLDE66E1WD] (Reporting by Christiaan Hetzner; editing by Simon Jessop)