European shares rise as banks recover, M&S gains

* FTSEurofirst 300 index rises 0.5 percent

* Banks rebound from falls after Portuguese auction

* Marks & Spencer gains after sales beat forecasts

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

LONDON, April 6 (Reuters) – European shares gained by
midsession on Wednesday as banks recovered from earlier session
falls on the back of a successful Portuguese debt auction and
brokers said there was long-term upside for key indexes in
Europe.

By 1141 GMT, the pan-European FTSEurofirst 300 (.FTEU3: Quote, Profile, Research)
index of top shares was up 0.5 percent at 1,149.23 points after
being as low as 1,140.20 earlier, but off its 2011 high made in
February.

“The sentiment is bullish, European indices are still below
the highs of this year and have further to catch up,” Angus
Campbell, head of sales at Capital Spreads, said. “We are still
seeing momentum taking us higher.”

Banks featured among the best performers after a successful
auction of Portuguese debt. Yields rose sharply from previous
auctions last month, intensifying pressure from local lenders
and ratings agencies to seek a bailout, but traders said this
had already been priced into the market.

The STOXX Europe 600 banks index (.SX7P: Quote, Profile, Research) rose 1.6 percent
with Barclays (BARC.L: Quote, Profile, Research), which has exposure to Portugal, up 2.5
percent.

Portugal’s PSI 20 (.PSI20: Quote, Profile, Research) pared some of its earlier losses
but was still down 0.2 percent. In other peripheral markets,
Spain’s IBEX 35 (.IBEX: Quote, Profile, Research) was up 0.6 percent and Italy’s benchmark
(.FTMIB: Quote, Profile, Research) rose 0.7 percent.

Elsewhere on the upside, retailers were in demand, with
Marks & Spencer (MKS.L: Quote, Profile, Research) jumping 5.5 percent after Britain’s
biggest clothing retailer beat sales forecasts. [ID:nLDE73506Q]

BOFA MERRILL LYNCH POSITIVE

Adding to the positive mood was a Bank of America Merrill
Lynch note saying Germany was its preferred play in Europe,
though it trimmed modestly its “overweight” position on global
equities.”

Although Merrill analysts said Brent crude being
persistently above $130 a barrel could create severe economic
damage, they added: “The economic recovery currently underway,
coupled with relatively easy monetary policy, should continue to
boost corporate profits and commodity prices.

“In the absence of further shocks, we expect the recovery to
broaden, and we maintain our ‘underweight’ in fixed income and
cash,” they added.

Barclays Capital said the Euro STOXX 50 (.STOXX50E: Quote, Profile, Research) and the
STOXX 600 (.STOXX: Quote, Profile, Research) could roughly rise 13 and 15 percent from
current levels as valuations remained cheap and fund flow data
suggested rising institutional interest in equities.

Equity valuations on Thomson Reuters Datastream showed the
STOXX Europe 600 (.STOXX: Quote, Profile, Research) pricing forecast earnings at 10.6
times, below a 10-year average of 13.5.

Across Europe, the FTSE 100 (.FTSE: Quote, Profile, Research) index was up 0.6
percent, Germany’s DAX (.GDAXI: Quote, Profile, Research) was 0.7 percent higher and
France’s CAC 40 (.FCHI: Quote, Profile, Research) was up 0.2 percent.
(Editing by David Holmes)

European shares rise as banks recover, M&S gains