European shares end up on U.S. consumer data

* FTSEurofirst 300 index ends up 0.1 pct

* ARM jumps after Intel-Infineon deal

* U.S. consumer confidence data supports

By Joanne Frearson

LONDON, Aug 31 (Reuters) - European shares edged higher on Tuesday, helped by a rise in U.S. consumer confidence data, though gains were limited by fears for economic recovery, with the market recording its worst monthly decline since May.

Merger and acquisition news also helped support the market. ARM <ARM.L> gained 8.6 percent after U.S. chipmaker Intel <INTC.O> unveiled a deal to buy German chipmaker Infineon's <IFXGN.DE> wireless unit. Infineon was down 0.9 percent.

The pan-European FTSEurofirst 300 <.FTEU3> index of top shares closed up 0.1 percent at 1,026.34 points, down around 1.7 percent for the month.

The Euro STOXX 50 <.STOXX50E> was 0.2 percent higher at 2,622.95, just above a key support level, the 23.6 percent retracement of a fall from an April high to a May low.

"Markets responded to the better-than-expected U.S. consumer confidence, but the markets have not made their mind up about the recovery," said Mike Lenhoff, chief strategist at Brewin Dolphin. "There are still worries about a double-dip recession."

The market pared losses after U.S. consumer confidence rose modestly in August.

Dutch chip equipment maker ASML <ASML.AS> slipped 3 percent after brokers downgraded their ratings on the stock following Intel's revenue warning last week.

SERCO SLIPS

British outsourcing company Serco Plc <SRP.L> was down 2.5 percent after BofA Merrill Lynch cut its rating to "neutral" from "buy" ahead of the UK government's spending review in October. Potash miner K+S <SDFG.DE> lost 0.4 percent as Credit Suisse cut its earnings per share (EPS) estimates by 11 percent and 10 percent for 2010 and 2011, respectively.

"If you look at all the noise, all the volatility and all the nervousness, it is clear that this market has one major fear at the moment, and that is the double dip," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

"And we are not going to have the answer to that one until the fourth quarter. There is more downside risk for equities over the next couple of weeks."

However, mining stocks reversed losses as the U.S. consumer data helped copper <MCU3=LX> recover from earlier falls.

Anglo American <AAL.L>, Antofagasta <ANTO.L>, BHP Billiton <BLT.L>, Rio Tinto <RIO.L> and Xstrata <XTA.L> rose 0.8 to 2.4 percent.

Across Europe, the FTSE 100 <.FTSE> index was 0.5 percent higher, Germany's DAX <.GDAXI> was up 0.2 percent, and France's CAC 40 <.FCHI> was 0.1 percent higher. (Additional reporting by Atul Prakash; Editing by Will Waterman)