* FTSEurofirst 300 flat
* Buyers step in at one-month lows
* Technical charts show scope for more weakness
By Toni Vorobyova
LONDON, Oct 9 (Reuters) - European shares steadied on Wednesday, with one-month lows attracting buyers and with investors balancing the continued U.S. fiscal deadlock against expectations of continuity from the new Federal Reserve head.
Lack of progress in the U.S. political deadlock kept a lid on gains. U.S. President Barack Obama said he would only negotiate with Republicans once they agree to re-open federal government, now in its second week of shutdown, and raise the debt ceiling with no conditions.
However, investors cheered the removal of one uncertainty, with news that Janet Yellen will be nominated to take over from Ben Bernanke at the Fed next year, bolstering expectations the U.S. central bank will tread carefully in unwinding equity-friendly stimulus.
"It's the Yellen effect that has brought financial market stabilisation," said Oliver Roth, head trader at Close Brothers Seydler.
The FTSEurofirst 300 index was flat at 1,231.24 points by 0949 GMT, recovering from an earlier one-month low of 1,226.80 and taking heart from U.S. futures pointing to a higher open on Wall Street.
"We've seen buyers in the last hour across the board... There are a few bottom fishers today," said Martin Tormey, head of equity trading at Goodbody Stockbrokers.
The recovery from the lows comes after the index, along with the broader STOXX Europe 600 - last at 306.82 points - moved into oversold territory on the seven-day relative strength indicator (RSI). But technical analysts said it was too soon to call a bottom.
"While indices are at or approaching oversold levels, price action is weak and risk remains for further near-term easing. For the STOXX 600, support is seen at 299.76," said Chris Wright, technical analyst at Informa Global Markets.
Spanish and Italian bourses led the gainers, with sentiment on those markets lifted by solid demand for their sovereign debt.
On the downside, investors remained concerned that the third quarter earnings season - which started in the United States this week and kicks off in Europe later this month - could bring disappointments on both numbers and outlook.
Earnings concerns were among the factors that prompted Morgan Stanley to downgrade building materials group Saint Gobain to 'underweight', sending shares 3.3 percent lower .
"Shares have rerated more than 30 percent year-to-date, but muted earnings upgrades and rising headwinds indicate expectations could fall," Morgan Stanley said in a note.
"Our lower earnings forecasts place us 5-6 percent below consensus expectations for operating income, presenting an unattractive risk-reward skew."
Thomson Reuters StarMine SmartEstimates - based on the views from top-ranked analysts - suggest that this year's earnings for STOXX Europe 600 companies will miss consensus by 0.8 percent.