* FTSEurofirst 300 closes up 0.3 pct at 1,361.54 points
* Euro STOXX 50 rises 0.3 pct to 3,172.72 points
* French telecom stocks boosted by merger moves
* Take more defensive approach - Sunrise Brokers strategist
By Sudip Kar-Gupta
LONDON, May 16 (Reuters) - Corporate takeover activity propped up European equities on Friday, allowing key indexes to recover after a sell-off in the previous session caused by weak economic data in Portugal and Italy.
The pan-European FTSEurofirst 300 index closed up 0.3 percent at 1,361.54 points, recovering from a 0.8 percent retreat on Thursday that had pushed the FTSEurofirst down from a 6-year peak of 1,372.81 points reached earlier this week.
The euro zone’s blue-chip Euro STOXX 50 index also rose 0.3 percent, to 3,172.72 points.
Takeover activity has supported European equities this year, and shares in French telecom firms such as Iliad and those of conglomerate Bouygues - which owns Bouygues Telecom - rose on Friday on new signs of deals in the sector.
Andreas Clenow, hedge fund trader and principal at ACIES Asset Management, said he believed that the broader, upwards trajectory for European stock markets - which has seen the FTSEurofirst rise 3.4 since the start of 2014 - was intact.
Clenow said the sell-off on Thursday, driven by news that the Portuguese and Italian economies had contracted in the first quarter, was not enough for him to reverse “long” positions betting on more gradual gains for European equities.
“So far, I don’t see enough damage to the uptrend,” he said.
Italy’s FTSE MIB equity index, which slumped 3.6 percent on Thursday, recovered slightly to end 1.1 percent higher, while Lisbon’s PSI-20 index edged up 0.1 percent after it had fallen 2.7 percent on the previous day.
HED Capital head Richard Edwards said the weak economic data out this week from Portugal and Italy showed how the euro zone remained beset with problems.
“We think there is always another euro zone crisis just around the corner,” he said.
Sunrise Brokers equity strategist Christopher Mellor backed a more defensive approach to the equity markets and favoured utility stocks - often preferred for their solid dividend yields - to protect returns in case of any more prolonged stock market declines or volatility.
“We are advocating a more defensive bias,” he said.
Additional reporting by Lionel Laurent; Editing by Pravin Char