London - European shares traded modestly higher on Tuesday, struggling for clear direction, as strategists weighed in on whether the recent rally still has further to run.

Britain's Barclays saw solid gains after announcing hefty job cuts, while auto-related stocks came under pressure on the back of downbeat earnings.

The FTSEurofirst 300 was up 0.1 percent at 1,155.15 by 1159 GMT, having traded within a narrow 4-point range on Tuesday in the wake of the previous session's 0.7 percent drop.

The index has slipped around 2 percent from a two-year closing high reached on Jan. 29.

Strategists indicated that the recent retreat by stocks looked more like a pause than the start of a serious correction, with the asset class attractive, particularly against a backdrop of low interest rates and below-inflation bond yields.

“From an asset allocation perspective, equities are still the major standout asset class that you'd probably want to own,” Exane BNP Paribas head of equity strategy Ian Richards said.

“As far as I understand, when markets have travelled a long way people automatically question the duration of any further rally. I think it would be a mistake to take the trade off.”

Standard Life Investments' global thematic strategist Frances Hudson said: “I think if you've done your fundamental analysis, there are decent opportunities and setbacks should be used to pick up stocks that you like for the long term.”

Standard Life Investments manages around 163 billion pounds ($255.3 billion) of assets.

The top FTSEurofirst 300 riser was Barclays, ahead 4.8 percent, with traders citing talk of potential upgrades should the UK lender meet targets set out in the firm's update on Tuesday.

Barclays is to axe at least 3,700 jobs and prune its investment bank, under a restructuring plan launched by its new chief executive which seeks to cut 1.7 billion pounds ($2.7 billion) in annual costs and improve standards.

“Barclays delivered exactly what the trading floor wanted...upgrades and increased price targets to follow,” Marc Kimsey, senior trader at Accendo Markets, said in a note.

Trading volume in Barclays was robust, at 143 percent of the 90-day daily average, against the FTSEurofirst 300 index at 41 percent.

Michelin sank 3.3 percent, the worst performer on the FTSEurofirst 300, as its results missed forecast and its outlook for 2013 operating income fell short of analysts' consensus.

Auto parts maker Faurecia dropped 0.8 percent after saying it is scrapping its dividend as it struggles to counter Europe's auto slump.

The grim state of the European auto sector has had a knock-on effect on other sectors.

Shares in Germany's biggest steelmaker ThyssenKrupp AG shed 0.9 percent after saying a slump in steel prices and weak car markets caused a sharp drop in profit.

Navigation device maker TomTom tumbled 7.9 percent after warning that earnings would halve in 2013 because of weak car sales and competition from providers of free maps. - Reuters