PARIS (Oct 13): European stocks paused on Monday following their steep three-week sell-off, with shares in airlines bouncing back as oil prices extended their slide on ample supply.

Air France-KLM gained 3.4 percent and Lufthansa climbed 3.3 percent as Brent crude sank below $88 a barrel, its lowest level in almost four years, after major Middle East producers signalled they would keep output high even if that meant lower prices.

Jet fuel, derived from crude, accounts for around a third of the operating costs of airlines, which means the recent oil price drop - Brent is down nearly 25 percent since mid-June - should be a boon for the sector's earnings.

After falling at the open, the FTSEurofirst 300 index of top European shares pared losses in late morning, and was up 0.04 percent at 1,293.48 points at 1018 GMT.

The index has lost about 8 percent since mid-September, mirroring a sharp pull-back in global equity markets fuelled by uncertainty about the timing of the U.S. Federal Reserve's first interest rate hike and revenue warnings from a number of U.S. and European companies, as well as deteriorating macro data from Germany, Europe's biggest economy.

On Monday, data showed German wholesale prices had dropped 0.9 percent year-on-year in September, further highlighting the disinflationary pressures besetting the euro zone economy.

"We're still looking quite poorly on the markets. The nervousness is still there. I don't think anyone will want to come running back into the market early doors," said Terry Torrison, managing director at Monaco-based McLaren Securities.

Around Europe, UK's FTSE 100 index has retreated about 8.8 percent in the latest pull-back over the last three weeks, Germany's DAX index has lost 12 percent and France's CAC 40 has dropped 11 percent.

Technical charts show most European indexes in "oversold" territory, with their 14-day relative strength indexes (RSI) below 30.

The RSI for Germany's DAX has dropped to 22.07, the lowest level since August 2011, representing its most "oversold" level in more than three years.

Despite mounting worries over the strength of the global economy, a number of investors have started to look for bargains following the pull-back in equities worldwide.

"The sell-off in global stocks and crude prices has clearly been flow-driven, and such a move brings good buying opportunities for long-term investors like us," said Evan Bauman, portfolio manager at ClearBridge Investments, which has $36 billion in assets under management.

"We've been holding cash in the past few months, about 13-14 percent of the portfolio, expecting a pull-back. With the market's recent retreat, we've been putting a bit of this money back to work."

LUXOTTICA SLUMPS

Shares in Italian eyewear group Luxottica sank 7.6 percent after the company said its new chief executive, Enrico Cavatorta, was set to leave after just six weeks in the job.

U.S. bank Citigroup downgraded Luxottica to "neutral" from "buy", citing corporate governance rifts at the company.

Also featuring among the biggest losers, STMicroelectronics fell 3.9 percent, hurt by rating downgrades from both Morgan Stanley and JPMorgan in the wake of a revenue warning from U.S. tech firm Microchip.