(Corrects first bullet rise to match paragraph 3)
* FTSEurofirst 300 up 0.7 pct, rebounds from 1-week sell-off
* Trading on London Stock Exchange halted due to glitches
* Lloyds falls on Ireland hit, margin outlook
* For up-to-the-minute market news, click on [STXNEWS/EU]
By Brian Gorman
LONDON, Feb 25 (Reuters) - European shares rose on Friday, bouncing from this week's sell-off but still on track for the biggest weekly fall in nearly eight months as uncertainty in the Middle East kept some investors on the sidelines.
Trading in British shares was halted at the open on Friday due to technical issues. Bourse operator London Stock Exchange (LSE.L) could not say when the market would reopen.
At 1147 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was up 0.7 percent at 1,154.12 points. The index is on course to fall 2.8 percent for the week, its biggest fall since early July.
Oil LCOc1 hovered around $112, having retreated from Thursday's highs of nearly $120, as top exporter Saudi Arabia said it was willing to step in to make up for any shortages as a result of a disruption to oil supplies from Libya. [ID:nL3E7DP079]
"It's a relief rally as oil prices have come down, but they're still high," said Richard Batty, investment director at Standard Life Investments in Edinburgh.
"There remains a lot of uncertainty about developments in the Middle East. You can't rule out the possibility of further political change - and obviously that would have implications for oil prices and financial markets. Higher oil prices would check growth in western economies."
Shares in construction and building materials gained ground, as investors cheered Saint-Gobain's (SGOB.PA) strong results and outlook. Saint-Gobain gained 6.4 percent. Eiffage (FOUG.PA) and CRH (CRH.I) added 6.3 and 3.8 percent respectively.
British bank Lloyds fell 5.3 percent on the CHi-X exchange LLOYl.CHI after it took a 4 billion-pound ($6.5 billion) hit from bad debts in Ireland and said margins will not improve this year, taking the shine off a return to profit for the part-nationalised lender. [ID:nLDE71O0M4]
However, most other banks were higher, with BNP Paribas (BNPP.PA), Banco Santander (SAN.MC), and Societe Generale (SOGN.PA) up between 1.8 and 2.8 percent. "Institutional investors have been aggressively buying European banks. They remain underweight but not at extreme levels," said HSBC strategists in a note.
For a take-a-look on the crisis: [ID:nLDE71M1AF]
For graphics: r.reuters.com/nym77r
Among other individual shares, Italy's top telecom operator Telecom Italia (TLIT.MI) rose 4.7 percent on the back of forecast-beating net results and dividend projections.
EADS EAD.PA fell 1.4 percent after the Airbus parent lost a $30 billion contract for 179 new U.S. Air Force refueling planes to U.S. rival Boeing (BA.N). [ID:nN24261868]
"It's too early to say if this is the bottom of the pull-back ... but there is a high probability that the recent rally has created a solid top," said Alexandre Le Drogoff, technical analyst at Aurel BGC, in Paris.
"The DAX 30 has broken out of its upward channel, and we've turned negative on the short term on this market."
Macroeconomics news was mixed.
The Conference Board's Leading Economic Index for the euro zone continued to point to economic recovery in January, but showed a slight deceleration from the previous two months. [ID:nLDE71O0RB]
Britain's economy contracted even faster than previously thought in the last three months of 2010, shrinking by 0.6 percent, after downward revisions to industrial and services output, official data showed on Friday. Analysts had expected an unchanged reading of -0.5 percent. [ID:nAHLODE7DU]
"It warrants caution on the policy response," said Batty. (Additional reporting by Blaise Robinson; Editing by Hans Peters)