* FTSEurofirst 300 index rises 1.2 percent
* Eni jumps, leads energy sector higher
* Defensive shares such as drugmakers in demand
By Atul Prakash
LONDON, Aug 22 (Reuters) - Beaten-down European shares rebounded on Monday as Eni , the largest foreign oil operator in Libya, jumped on hopes of an end to conflict there and as investors grabbed shares offering value after recent declines.
Italian oil and gas company Eni rose 4.7 percent, leading energy stocks higher, after Libyan rebels that have been fighting to end Libyan leader Muammar Gaddafi's four-decade rule entered the capital Tripoli. The European oil and gas shares rose 1.7 percent.
At 0908 GMT, the FTSEurofirst 300 index of top European shares was up 1.2 percent at 920.75 points after falling 1.7 percent on Friday. The index is still down about 15 percent so far this month and is on track for its biggest monthly decline since the index started in 1999.
Defensive sectors such as healthcare were also in demand, with the sector index up 1.7 percent and Roche gained 2.7 percent.
"I am sure that there are some bargain hunters active in the market. Equities might gain some momentum as the week progresses," said Mike Lenhoff, chief strategist at Brewin Dolphin.
"But if the market has to sustain the rebound, it has to have some cyclical sectors such as banks and mining behind it. Defensives tend to steady the markets, but I am not sure that they help to lead to a sustainable path for a rebound."
He said that the market wanted to see sentiment turning more favourably towards cylicals such as financials, but it looked difficult in the current environment when everybody was focusing on the risks of a slowdown.
European stocks have fallen sharply in the past weeks and hover not far from a two-year low on growing concerns that the global economy could head for a recession.
"Markets run on two emotions -- fear and greed, and we have switched to the fear emotion in recent weeks. Recession fears are major concerns for investors and we have seen a lot of economic indicators slowing quite substantially," said Keith Bowman, equity analyst at Hargreaves Lansdown.
LOW VALUATIONS
Nomura analyst Ian Scott said that on some measures, European stocks were now trading on similar valuations to those that prevailed in early 2009, but the fundamentals were not as severe as they were some years ago.
"With European stocks now priced for a hit to earnings of approximately 30 percent, we still believe the overall market is oversold at current levels. That said, within the market, the most cyclical sectors still trade on above normal multiples and are vulnerable to further underperformance."
According to Thomson Reuters Datastream, the STOXX Europe 600 index carried a 12-month forward price-to-earnings ratio of 8.7, the lowest since early 2009, against a 10-year average of 13.3.
Investors kept a close eye on the European debt crisis, which has been undermining sentiment. European Central Bank Governing Council member Ewald Nowotny told an Austrian magazine he was concerned that euro zone countries will not push through parliamentary approval of changes to their EFSF bailout fund as quickly as planned.
Member states have to adopt revisions to the European Financial Stability Facility (EFSF) so that it can take over from the ECB the job of buying debt of struggling members on secondary markets if needed.
Investors waited for a speech by the U.S. Federal Reserve Chairman Ben Bernanke at an annual central bank conference in Jackson Hole, Wyoming, on Friday for his views on the pace of economic growth and for any hints of tools the Fed has to fortify the economy.
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