* FTSEurofirst 300 up 0.2 percent
* BT rallies 4.2 pct after results beat
* Spanish index down 1.5 pct as short-selling ban is lifted
By Francesco Canepa
LONDON, Feb 1 (Reuters) - European shares edged higher on Friday, led by British stocks after telecoms operator BT reported better-than-expected results while data showing growth in Chinese factories boosted mining stocks.
Strong demand for broadband and tight cost control helped BT offset the combined pressures of regulation and recession to post a better-than-expected 7 percent rise in third-quarter pre-tax profit, sending its shares 4.2 percent higher.
Also rising were heavyweight basic resources stocks, up 0.7 percent. The two versions of China's purchasing managers' index PMI showed factory output in the world's largest consumer of metals rose in January, although one showed the revival was still only moderate.
The broader FTSEurofirst 300 index was 0.2 percent higher at 1,166.40 points, struggling for direction as key economic releases due later in the day, including euro zone manufacturing figures just before 0900 GMT and a U.S. jobs report at 1330 GMT, kept investors on tenterhooks.
The FTSEurofirst is up by around 3 percent since the start of 2013, extending a rally launched by the European Central Bank's pledge last July to protect the euro from the sovereign debt crisis.
Traders said some volatility was on the cards ahead of the U.S. non-farm payrolls report, which is expected to offer more hope that the world's largest economy is on track to recover robustly, even after a disappointing quarterly GDP reading.
"The initial data from the euro zone and the UK may give us some direction but then again I think towards midday we're going to see some volatility, low volumes and people staying on the sidelines," Ishaq Siddiqi, a strategist at ETX Capital, said.
"January was a spectacular month and indices are exhausted. With a month like February, where there are some many risks involved, like the Italian elections and the U.S. debt debate, it would be normal top see some profit taking."
Wouter Sturkenboom, investment strategist at Russell Investments, had tactically reduced his equity weighting to slightly "underweight" while he was "overweight" cash, believing the share price rally had taken valuations to levels that are unattractive in the context of low economic growth.
Russel, which has $170 billion under management, expected the payrolls report to show 168,000 jobs were added in January. A Reuters poll of analysts shows a consensus of 160,000.
"Payrolls should continue in their mediocre pace of expansion at around 150,000-160,000 a month," Sturkenboom said.
"If we see 200,000 plus, which we don't expect, that would be very bullish. It would challenge my view that the U.S. is slowing down at the moment."
He said a reading of less than 100,000 would raise an alarm bell but he cautioned that a single, disappointing reading would not be enough to turn him more bearish on shares.
Spain's Ibex underperformed on Friday, shedding 1.5 percent after the country's market regulator lifted its ban on selling borrowed stocks and bonds, is a sign some investors were betting on declines in Spanish stocks after a 23 percent rally in the past month.
Lender BBVA weighed, down 1.3 percent, after saying its net profit fell 44 percent in 2012 due to big provisions against soured property assets in its home market, in a reminder of the fierce economic crisis facing Spain.