* FTSEurofirst 300 up 0.1 percent following sharp drop
* Energy shares bounce back along with crude prices
* J.Baer sags on disappointing targets; ING up on asset sale
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By Blaise Robinson
PARIS, Sept 25 (Reuters) - European stocks inched higher around midday on Friday following the previous session's sharp drop, as energy shares rebounded along with crude prices, eclipsing weakness in the industrial sector.
A pledge by the Group of 20 nations to keep emergency programmes in place until the economic recovery is secured also lifted investor sentiment, hit on Thursday by gloomy U.S. housing data.
At 1128 GMT, the FTSEurofirst 300 index of top European shares was up 0.1 percent at 988.00 points. The index, which tumbled 1.9 percent to a two-week closing low on Thursday, is on track to record a loss of 1.8 percent on the week.
"Overall, earnings have beaten estimates during the last earning season, but not the revenue figures, and this is a sword of Damocles hanging over equities," said Eric Turjeman, head of equities at Societe Generale Asset Management.
"Stocks are now back at more 'normal' valuation levels, and investors are waiting for signs that profits are really back before pushing stocks higher again."
Banking stocks were mixed, with HSBC up 1.5 percent and UBS down 1.4 percent.
Julius Baer fell 5.7 percent after giving disappointing targets in a strategy update and saying it would not increase dividends or buy back shares.
ING rose 2.2 percent after saying it will sell its 51 percent stake in a wealth management joint venture to partner Australia and New Zealand Banking Group for 1.1 billion euros, as the Dutch group slims down through asset sales.
Shares in industrial engineering companies lost ground, hit by demand concerns. Sulzer fell 2.1 percent, Alstom dropped 1.5 percent and ABB lost 1.9 percent.
Shares of oil majors trimmed recent losses, climbing along with oil prices, which recovered from Thursday's drop to an eight-week low, but gains were limited by high fuel inventories as well as doubts about the strength of the global economic recovery.
PROFITS POISED FOR A REBOUND?
BP rose 1.2 percent, Royal Dutch Shell climbed 0.5 percent and ENI added 1.3 percent.
Around Europe, UK's FTSE 100 index was up 0.5 percent, Germany's DAX index flat, and France's CAC 40 up 0.1 percent.
The FTSEurofirst 300, which has surged 53 percent since reaching a floor in March, is up 19 percent in 2009 and on track to record its best quarterly performance in nearly a decade, although it is still down 40 percent from a multi-year peak reached in mid-2007.
Stock valuations are now back at levels last seen in May 2006, with stocks in the FTSEurofirst 300 index currently trading at 13.6 times expected earnings, according to Thomson Reuters data.
But a number of analysts said this won't prevent stocks from rising further, as profits are poised for a rebound.
"After two years of falling earnings, European 12-month forward earnings appear to have troughed," Citigroup analyst Anna Esposito wrote in a note.
"The clearest signs of a recovery are from the financials, tech, general retail and basic resources."
On the macro front on Friday, investors were preparing for U.S. durable goods data, due at 1230 GMT, and U.S. new home sales figures expected at 1400 GMT.
(Reporting by Blaise Robinson; editing by John Stonestreet)