* FTSEurofirst 300 +0.7 pct, up for 7th time in 9 sessions
* Cautious investors buy big div-yield telecoms, pharmas
* DAX loses 0.9 pct, charts show index weakest in Europe
* For up-to-the-minute market news, click on
By Blaise Robinson
PARIS, Sept 1 (Reuters) - European share prices rose on Thursday led by defensive sectors, with investors encouraged by data showing U.S. factory activity cooling in August but still expanding.
The FTSEurofirst 300 index of top European shares ended 0.7 percent higher at 973.39 points, gaining ground for the seventh time in nine sessions.
But the recovery rally following a 20-percent nosedive in four weeks was seen fragile, with relatively thin volumes this week.
Defensive shares with big dividend yields were in demand on
Thursday, with Deutsche Telekom
The four stocks have dividend yields ranging from 5.7 percent to 10.5 percent, well above the benchmark 10-year Bund yields of 2.1 percent.
Valerie Gastaldy, head of Paris-based technical analysis firm Day By Day, said despite this week's recovery investors shouldn't rush to buy equities even if valuation levels look attractive.
"The heart of the problem is in the bottom-up analysis, which highlights interesting mid-term opportunities, while top-down analysis highlights a clear deterioration in risk conditions," she said, referring to recent sluggish macro economic data.
"Either the market purges one last time, and puts the record straight ... or we are entering a very high dispersion phase, with sector rotation and intra-sector rotation which is difficult to anticipate. In both cases, there is no urgency to buy."
BAD, BUT NOT AS BAD AS FEARED
The U.S. ISM index of national factory activity edged down to 50.6 from 50.9 in July, remaining at its lowest level since July 2009. However, analysts had been expecting the index to fall to 48.5.
"All in all, the deterioration of the U.S. economy isn't as bad as feared by the consensus, which is very 'bear'. But activity remains fragile," said Arnaud Cayla, fund manager at Barclays Wealth Managers France.
"However, the market might start to expect further measures from the (Federal Reserve's) FOMC (Federal Open Market Committee) while inflationary pressures have abated."
Around Europe, UK's FTSE 100 index rose 0.5 percent, France's CAC 40 gained 0.3 percent, while Germany's DAX index tumbled 0.9 percent.
Charts show cyclicals-heavy DAX index , hard hit over the past month, remains the weakest European benchmark index in the short term.
The German blue-chip index remains in the lower band of its Bollinger Bands -- a momentum indicator that uses standard deviations away from a simple moving average, while the Euro STOXX 50 , the FTSE 100, the CAC 40 , Spain's IBEX and Italy's FTSE MIB are all in the upper band of their respective Bollinger Bands.
The DAX sank 19.2 percent in August, underperforming Europe's broad FTSEurofirst 300, which lost 10.6 percent over the same period.
Last month Italy, France, Spain and Belgium put in place a ban on short selling of shares of financial institutions, which also applies to derivatives based on indexes that contain financial shares such as the CAC 40 and the Euro STOXX 50.
The charts also show the Bollinger Bands for all the indexes sharply narrowing over the past few sessions, which usually warns of a sharp move that could come in the short term. (Additional reporting by Juliette Rouillon; Editing by Greg Mahlich
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