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* FTSEurofirst 300 up 0.7 pct, Euro STOXX 50 up 0.4 pct
* Euro STOXX 50 briefly breaches resistance level
* Italian stock index falls on political tension
* EADS gains 8 percent, GDF Suez drops 11 percent
By Atul Prakash
LONDON, Dec 6 (Reuters) - The FTSEurofirst 300 index of top European shares posted an 18-month closing high on Thursday, with positive technicals, an improving global economic outlook and attractive valuations raising equities' appeal.
The widely-tracked index finished 0.7 percent higher at 1,131.85 points, the highest close since late May 2011. The index is up about 13 percent so far this year and has gained nearly 20 percent from multi-month lows in June, partly on supportive measures taken by central banks across the globe.
"We still have some risks, but the magnitude of the risks has diminished and they are being handled in a better way," said Ben Hauzenberger, fund manager at Zurich-based Swisscanto Asset Management, which manages about $65 billion.
"Equities have been quite attractively valued and that's one of the reasons why people are shifting money into stocks."
According to Thomson Reuters Datastream, the broad STOXX 600 is trading at about 11 times its 12-month forward earnings, below its 10-year average of more than 12 times and 12.5 times for Wall Street's S&P 500.
Analysts said the market still faced several uncertainties like the ongoing budget negotiations in the United States, and political wrangling in Italy that caused the country's FTSE MIB index to go against the trend, slipping 0.8 percent.
Silvio Berlusconi's party withdrew its support for Italian Prime Minister Mario Monti, raising the risk of a snap election, but President Giorgio Napolitano said he would work to avoid a crisis and there was no need for alarm.
And investors' focus remained on the United States where negotiations dragged on to avert some $600 billion of tax hikes and spending cuts from January, that could push the world's biggest economy back into recession.
"We shouldn't underestimate that there is a great deal of uncertainty and a huge amount of money on the sidelines," said Christopher Aldous, chief executive of Evercore Pan-Asset, which has around 700 million sterling under management.
"The European situation has improved. The likelihood of an imminent euro bust-up has diminished and we would expect more positive news up to (German Chancellor Angela) Merkel's re-election in September."
Sectors more exposed to economic growth were in demand, with the European mining index rising 1.6 percent. Chemicals were up 1.9 percent, helped by a 3.4 percent rise in Bayer after its Eylea eye product was submitted for European Union marketing authorisation.
Auto shares rose 1 percent, while technology shares were 0.8 percent higher, helped by a 2.3 percent rise in Software AG.
"The software sector is an interesting place to be as some companies are global and their cost structures are low," Hauzenberger said.
The euro zone's blue-chip Euro STOXX 50 index ended 0.4 percent higher at 2,603.41 after setting a new 2012 high of 2,617.83 and briefly breaching its March high of 2,611, which has become a strong resistance level.
"We had a fairly positive run-up over the past few weeks and there is a risk that the index might be getting a little bit exhausted in the last weeks of the year," Lynnden Branigan, technical analyst at Barclays Capital, said.
"If it decisively closes about its March highs of 2,611 in the coming sessions, then it would be a very positive sign for the stock market. You would be looking towards the highs of around 2,700 in August last year."
Analysts said that equities had potential to post decent gains in the medium to longer term as some economic indicators, especially in the United States and China, were improving.
Catherine Garrigues, head of equities of Allianz Global Investors France, said recent flow data showed the market might finally be at a turning point, with equity investors returning.
"Trading volumes have been very low this year, because of the extreme volatility of the past years but also because of punitive regulation for institutional investors, but at this point there aren't any sellers left on the market."
Corporate news resulted in wild moves in some stocks. EADS rose 8 percent as its shareholders agreed an overhaul of its ownership structure, with Bank of America Merrill Lynch raising its rating on the stock to "buy" from "neutral".
However, GDF Suez slumped 11 percent after warning of lower profits.