European shares drift higher as Greece jitters persist

European shares edged higher yesterday, led by banks though investors remained wary of the debt problems in Greece and other peripheral eurozone economies.

The FTSEurofirst 300 index of leading European shares closed 0.2 per cent higher at 980.96 points in choppy trade, after rising 0.7 per cent on Monday to snap a three-day losing run. The index has fallen 6.2 per cent so far this year but is still up 52 per cent from a low hit in early March 2009.

Banks were among the top gainers in Europe, though they pared some gains towards the end of the session. Traders said comments by Fitch Ratings that Britain was among the most vulnerable of triple-A sovereigns that took some of the wind out of UK banks.

HSBC, Banco Santander, Deutsche Bank, BNP Paribas, Credit Suisse and Barclays advanced 0.3 to 2.8 per cent. Swiss bank UBS fell 5.4 per cent after reporting clients withdrew far more money than forecast.

Across Europe, Britain's FTSE 100 put on 0.4 per cent, Germany's DAX added 0.2 per cent and France's CAC 40 rose 0.2 per cent. Miners were in demand, with Anglo American, Rio Tinto, BHP Billiton and Eurasian Natural Resources up 1.5 to 3.7 per cent.

European banks have lost 11 per cent this year after being hurt by concerns over the eurozone debt and US President Barack Obama's plans to limit banks' abilityto take risk.

Earlier, European stocks rose on expectations about a rescue for Greece after news that European Central Bank President Jean-Claude Trichet was leaving a meeting of central bankers in Australia early to attend a European Union leaders' summit in Brussels tomorrow.

ECB, however, said Mr Trichet was changing his plans and return to Europe purely because of logistics. Greek bank shares, after falling for four straight sessions, surged 8.6 per cent, with Alpha Bank up 14.9 per cent and EFG Eurobank up 10.9 per cent.

"This is a little bit overblown ... you know it's going to be bailout eventually. Is it the EU? Is it the IMF? It doesn't matter. They are not going to default," said Robert Quinn, European strategist at Standard & Poor's equity research.

"What we are waiting on is a political solution, not an economic solution ... They have a different time scale."

A senior German ruling coalition source said after the European market close that eurozone countries have decided in principle to help debt-stricken Greece.

Across Europe, Britain's FTSE 100 put on 0.4 per cent, Germany's DAX added 0.2 per cent and France's CAC 40 rose 0.2 per cent. Miners were in demand, with Anglo American, Rio Tinto, BHP Billiton and Eurasian Natural Resources up 1.5 to 3.7 per cent.

Defensive shares, such as drugmakers, utilities, tobacco firms and telecoms, were also weaker, with investors favouring beaten-down banks. Unilever, E.ON, Novartis and Imperial Tobacco eased 0.2 to 1.6 per cent.

Drugmaker AstraZeneca, however, was up 1.3 per cent after US approval for expanded use of Crestor strengthened its position in the highly competitive cholesterol drug market.

Among other individual movers, Swatch Group soared 4.8 per cent after it posting forecast-beating full-year profit and maintained a positive outlook for 2010, easing worries a flagging economic recovery may hit demand.

Wind turbine maker Vestas surged 7.8 per cent on news of a planned roadshow for bond investors and a Canadian order, traders said.

On the downside, Unibal-Rodamco shed six per cent after the Franco-Dutch property group issued disappointing 2010 guidance with its annual profits.