By Richard Hubbard

LONDON, Jan 28 (Reuters) - Rallies in European shares and

the single currency stalled on Monday after strong gains last

week as investors awaited confirmation that financial market

conditions and the outlook for the euro area have improved.

Investor sentiment rose strongly on Friday after data showed

European banks would repay more than expected of the emergency

loans they borrowed from the European Central Bank (ECB) and

that business sentiment in Germany was improving sharply.

A solid start to the corporate earnings season has also

helped send many equity indexes to pre-financial crisis highs,

with the Standard & Poor's 500 index closing last week at its

highest level in over five years.

In the equity markets Europe's FTSEurofirst 300 index shed 0.1 percent in early trade to 1,173.87 points,

levelling off near its highest level for almost two years,

though traders said there was still strong underlying demand.

'All European benchmarks are at their 2012-2013 highs. Every

time there's even a slight pull-back, the buying pressure comes

in,' Aurel BGC chartist Gerard Sagnier said.

The market's cautious mood on Monday also followed a weaker

session in Asia, where falls in technology companies saw the

MSCI's broadest index of Asia-Pacific shares outside Japan drop 0.4 percent.

The euro held near an 11-month high against the dollar

$1.3440 on Monday, and gold is languishing near

a two-week low as hopes for an economic recovery worldwide

dampen the metal's appeal as a safe haven.

Investors are keenly awaiting the ECB's monthly data on bank

lending to companies and consumers, due later, for confirmation

that growth is returning to the economy. Italy will also provide

a test of investor sentiment when it auctions almost 7 billion

euros ($9.4 billion) of 2-year and 5-year bonds.

However, the main focus for investors this week will be on

the U.S., where the Federal Reserve's Open Market Committee

meets on Tuesday and Wednesday, and where the nonfarm payrolls

report is due out on Friday.

Oil prices were being held in check by the events coming up

in the U.S., with Brent crude unchanged at $113.28 a

barrel, while U.S. crude rose 17 cents to $96.05 after

seven straight weekly gains - the longest such streak since

early 2009.

($1 = 0.7421 euros)

(Reporting by Richard Hubbard; Editing by Will Waterman)

((richard.hubbard@thomsonreuters.com)(Tel +44 207 5423215))

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