Financials lead European shares up; BoE holds rate

* FTSEurofirst 300 index gains 0.2 percent, led by banks

* BoE keeps rates on hold, as expected

* Portuguese bank stocks rise after country seeks bail out

* ECB interest rate decision eyed, rise expected

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

By Brian Gorman

LONDON, April 7 (Reuters) – European shares hit their
highest in a month on Thursday, led by banks, as strategists
said a bailout for Portugal would give stability to the market,
and interest rate rises would not derail equities’ advance.

Investors will focus on the European Central Bank (ECB)
interest rate decision due at 1145 GMT.

A Reuters poll said the ECB is likely to raise interest
rates as it focuses on controlling inflation, though it is not
expected to give many clues on when the next rise will come,
fearful not to hurt the euro zone’s struggling peripheral
countries. [ID:nSLAUEE7RO]

The Bank of England earlier kept interest rates at a record
low of 0.5 percent, as expected.

At 1105 GMT, the pan-European FTSEurofirst 300 (.FTEU3: Quote, Profile, Research)
index of top shares was up 0.2 percent at 1,149.30 points after
earlier hitting 1,151.50, the highest in nearly a month.

Banking stocks featured among the best performers, with the
STOXX Europe 600 Banks index (.SX7P: Quote, Profile, Research) gaining 1.8 percent.

Portugal’s Millennium bcp (BCP.LS: Quote, Profile, Research), Banco Espirito Santo
(BES.LS: Quote, Profile, Research) and BPI (BBPI.LS: Quote, Profile, Research) gained between 4.1 and 4.6 percent
after Portugal requested financial aid from the European Union,
outperforming the country’s PSI 20 index (.PSI20: Quote, Profile, Research), which was 1.3
percent higher.

Other banks to rise included BNP Paribas (BNPP.PA: Quote, Profile, Research), Banco
Santander (SAN.MC: Quote, Profile, Research) and Credit Suisse (CSGN.VX: Quote, Profile, Research), up between 2.1
and 2.8 percent.

Portugal is the third euro-zone country to seek a bailout,
and investors are now watching to see if Spain could be next,
though analysts say Spain’s financial position is improving.

“It’s all heading in the right direction. The debt markets
are stable on the back of the Portuguese bailout. I think that’s
a pretty good result,” said Dean Tenerelli, fund manager at T
Rowe Price. “And the news yesterday on the capital raising for
the financials (Commerzbank (CBKG.DE: Quote, Profile, Research) and Intesa Sanpaolo
(ISP.MI: Quote, Profile, Research)) reassures the market that Europe is dealing with the
banks.”

He added that investors would not be troubled by the ECB
raising rates, and were already expecting further rises. “The
markets are not pricing in rates at 1.25 pct going forward. As
long as the increases are slow and steady, that’s fine for
equities.”
(Editing by Will Waterman)

Financials lead European shares up; BoE holds rate