UPDATE 1-Tech stocks fall as U.S. deadlock curbs European equity rally
* FTSEurofirst 300 and Euro STOXX 50 edge up 0.1 pct
* Ericsson and Dassault Systemes fall, hitting tech sector
* U.S. stalemate keeps European equity indexes in check
* Most investors still expect eventual U.S. debt deal
* VSTOXX volatility index rises 10.4 pct
By Sudip Kar-Gupta
LONDON, Oct 14 (Reuters) - European shares made minor gains on Monday as a U.S. budget deadlock kept stock markets in check, while falls in Ericsson and Dassault Systemes hit technology shares.
Longer-term investors bet that the broader European equity rally remained intact, predicting an eventual deal to fix the U.S. stalemate, although others cautioned that markets would be volatile in the near-term.
The pan-European FTSEurofirst 300 index edged up 0.1 percent to 1,252.47 points, while the euro zone's Euro STOXX 50 index marked a fresh 2-1/2 year high by also creeping up by 0.1 percent to 2,977.69 points.
The STOXX Europe 600 Technology Index was the worst-performing European equity sector, falling 0.9 percent after being dragged lower by a 2.1 percent drop at wireless networks group Ericsson and a 10.5 percent slump at Dassault Systemes.
Ericsson was hit by a ratings downgrade by Barclays, while Dassault, a software and consulting group, fell after warning that lower-than-expected orders would hit revenue growth.
Gains on European equities were also held back by continuing stalemate in Washington over a new federal budget or raising the $16.7 trillion U.S. debt ceiling, which Treasury Secretary Jack Lew said the government would hit no later than Oct. 17.
Cyrille Urfer, head of asset allocation at Swiss bank Gonet, remained optimistic that politicians would reach a deal to raise the U.S. debt ceiling, which would in turn give another leg-up to European shares.
"I cannot believe that they will not find a solution. At the least, they can push the can down the road again for a couple of months," he said.
"There will be volatility, but volatility means opportunities and Europe has been an interesting place to invest over the last couple of months."
Worries about the near-term uncertainty over the U.S. situation were reflected in a 10.4 percent rise in the Euro STOXX 50 Volatility Index, often referred to as the "VSTOXX".
Trading volumes also came in below average, with volumes on the FTSEurofirst 300 standing at 74 percent of the index's usual 90-day average amount, as some investors chose to stay on the sidelines.
Even though most investors expect an eventual resolution, some have used the uncertainty to sell shares to cash in on the rally so far this year, with the FTSEurofirst 300 up 11 percent since the start of 2013 and the Euro STOXX 50 up 13 percent.
Andrea Williams, European equity fund manager at Royal London Asset Management, said she had trimmed back some equity holdings over the last month.
She added that revenue and profit warnings from the likes of Dassault Systemes and Unilever were a further reason to have sold off some equity positions.
"We've raised a bit of cash. We're a little bit concerned about the forthcoming results season, as shown by the Dassault Systemes warning today," said Williams.
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