Banks lead rally in European shares

European shares rallied in midday trade yesterday with banks taking the lead ahead of the rate decision by the Federal Reserve and following consensus-beating results from Société Générale.

By 10.29 GMT, the FTSEurofirst 300 index of top European shares was up 1.7 per cent at 1,172.63 points, having fallen one per cent the day before.

Banks were the top performers in Europe, after SocGen released second-quarter earnings, which came in better than expected, sending the stock up nearly seven per cent.

Analysts were relieved by the performance of the group's Corporate and Investment Banking unit and lower asset writedowns.

The DJ Stoxx European banks index rose 3.5 per cent, with HBOS adding 6.5 per cent, UBS advancing 5.5 per cent and Deutsche Bank climbing 4.5 per cent.

Financials were also in the spotlight ahead of the interest rate decision by the US Federal Reserve, due after the European market close. The central bank is expected to leave rates at two per cent.