Europe shares rally as ECB lending data reassures

* FTSEurofirst 300 up 2.3 pct, reverses early losses

* Euro STOXX 50 breaks above first key retracement level

* Brisk volume seen in corporate insider buy -2iQ data

* HSBC strategists say number of 'buy signals' still missing

* For up-to-the-minute market news, click on

By Blaise Robinson

PARIS, Aug 12 (Reuters) - European stocks rebounded in mid-morning on Friday, reviving the previous session's recovery rally from a 20-percent dive over 3 weeks, following reassuring data from The European Central Bank's overnight loan facility.

The ECB said the use of its overnight loan facility by banks totalled 227 million euros, much lower than the 4 billion euros borrowed the previous night, easing fears that a number of banks were facing liquidity issues.

"This indicator is often regarded as a measure of bank risk aversion. (Today's data) do not indicate any hard funding crisis," a Paris-based trader said.

"Yesterday's figure fuelled the rumours that some banks were experiencing difficulties."

At 0943 GMT, the FTSEurofirst 300 index of top European shares was up 2.3 percent at 955.97 points, after surging 2.7 percent in the previous session.

The euro zone's blue chip Euro STOXX 50 index was up 2.7 percent at 2,274.95 points, breaking above the first key retracement level of its recent slump, the 23.6 percent Fibonacci retracement, at 2,246.86 points, sending a bullish signal.

The next resistance is at 2,351.91 points, the 38.2 percent retracement.

Friday's rally also comes after a short-selling ban on financial shares by France, Italy, Spain and Belgium.

The STOXX bank index was up 2.7 percent, with Dexia up 6.1 percent, Santander up 2.9 percent and Societe Generale up 1.4 percent.

"Something needed to be done, the rumours were silly and the market was full of emotion and fear. So this provides a break in that, so not bad," a London-based fund manager said.

"I don't think it works long term but should buy some time ... It already looks like the short sellers are moving to the CDS market."

European Securities and Markets Authority (EMSA) said in a statement late on Thursday that France, Italy, Spain and Belgium imposed the ban which came into effect on Friday but will vary in detail depending on the country.

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List of stocks with short selling bans

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Despite the recent market turmoil, corporate insiders have been scooping up shares in their companies in large volumes this month, according to 2iQ Research, a Frankfurt-based firm which monitors directors' dealings.

So far this month, there were 926 insider purchases compared to 107 insider sells, with buying volume representing 246 million euros versus selling volume representing 17.7 million euros.

Brisk insider buying is usually seen by market strategists as a key indicator that a downward stock market is getting close to a floor.

For HSBC strategists, however, equities may be approaching capitulation after the recent sell-off, but other conditions for calling a bounce -- such as further corporate earnings downgrades and the passing of risk events -- are not met yet.

"In the meantime, we advise investors to buy stocks with good long-term growth prospects, relatively little short-term earnings risks, that have become cheap," HSBC strategists said in a note. (Reporting by Blaise Robinson; additional reporting by Judith Macinnes in Madrid, Sudip Kar-Gupta and Dominic Lau in London; Editing by Hans-Juergen Peters)

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