Banks lead modest rally in European shares

* FTSEurofirst 300 index up 0.5 percent

* SABMiller falls as outlook disappoints

* For up-to-the minute market news, click on [STXNEWS/EU]
By Joanne Frearson

LONDON, May 20 (BestGrowthStock) – Banks led European shares in a
modest bargain-hunting rally on Thursday morning after the
previous session’s 3 percent drop, but the rebound was tempered
by uncertainty over market regulation and high volatility.

By 0850 GMT, the pan-European FTSEurofirst 300 (.FTEU3: )
index was up 0.5 percent at 1,001.66 points. The index is still
down 10.2 percent since sovereign debt worries in the euro zone
escalated in mid-April.

The markets tumbled on Wednesday in response to Germany’s
move to ban naked short selling of some financial assets, and
its unilateral action raised concerns that EU governments were
divided over their approach to the turbulent markets.

Banks regained some lost ground, with Banco Santander
(SAN.MC: ), HSBC (HSBA.L: ), BNP Paribas (BNPP.PA: ), Barclays
(BARC.L: ) and UBS (UBSN.VX: ) up 1.2 to 3.3 percent.

“It’s bargain hunting after yesterday’s falls, but
volatility remains high,” said Will Hedden, sales trader at IG
Index. “The markets did not take to the German ban and I would
not expect to see people piling in too much as the risks to the
downside are still very strong.”

Jean-Claude Juncker, chairman of the Eurogroup forum, said
financial markets were acting irrationally over the euro area’s
debt problems.

OIL SHARES GAIN

Energy stocks were given a boost as crude (CLc1: ) traded
above $70 a barrel after U.S. crude stocks rose less than
expected.

BP (BP.L: ), BG Group (BG.L: ), Royal Dutch Shell (RDSa.L: ) and
Total (TOTF.PA: ) gained 1.1 to 2.7 percent.

SABMiller (SAB.L: ) sank 5.6 percent after saying it expects a
recovery in consumer spending only towards the end of 2010 and
reported a 17 percent rise in annual earnings which narrowly
missed consensus forecasts.

British Land (BLND.L: ) rose 1.9 percent, buoyed by a UBS
upgrade to “buy” from “neutral” in the wake of the property
group’s full-year results on Tuesday, and following recent share
price weakness.

Vodafone (VOD.L: ) added 1.9 percent after the mobile
communications firm and top Indian carrier Bharti Airtel
(BRTI.BO: ) paid a combined $5.1 billion for 3G mobile licences in
India, the world’s fastest growing mobile phone market.

Across Europe, the FTSE 100 (.FTSE: ) index was up 0.8
percent, Germany’s DAX (.GDAXI: ) was up 0.2 percent and France’s
CAC 40 (.FCHI: ) was up 0.6 percent.

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(Reporting by Joanne Frearson, editing by Will Waterman)

Banks lead modest rally in European shares