Banks, commods lead European shares higher

* FTSEurofirst 300 index rises 1.4

* Banks, commods gain

* Economic data paints bleak picture ahead

By Joanne Frearson

LONDON, Jan 2 (Reuters) - European shares pushed higher at midday on Friday, with banks and commodities taking the lead on the first trading day of the year, despite a dismal reading in the Euro Zone manufacturing index and UK house prices falling more than expected. By 1137 GMT, the pan-European FTSEurofirst 300 .FTEU3 index of top European shares was up 1.4 percent at 843.32 points. The index finished 2008 with a slump of 45 percent.

"In the face of bad economic news flow, the markets have held up very well and are well off their bottoms. Markets are saying we have been discounting all this bad news for the past year and are now holding up," said Mike Lenhoff, strategist at Brewin Dolphin.

"Markets in the past have also tended to do well at the start of the year and the rise could be attributed to a strong seasonal effect," added Lenhoff.

On the economic front there was little to cheer about. Manufacturing activity in the euro zone sank to a record survey low in December, below an already dire flash reading, while the outlook remained grim as new orders also sank to new lows. [ID:nL2197753]

In the UK, house prices in Britain fell by a bigger-than expected 2.2 percent in December for an annual drop of 16.2 percent, the country's biggest mortgage lender Halifax said. [ID:nLAJ000130]