* FTSEurofirst 300 up 0.5 pct, reaching a 5-week high
* Insurers retreat after posting poor results
* EDF rises on France's planned electricity tariff hike
By Blaise Robinson
PARIS, Aug 7 (Reuters) - European stocks rose in early trade
on Thursday to hit a 5-week high as rallying energy and utility
stocks offset insurers hit by poor results, while investors
braced for key interest rate decisions.
EDF <EDF.PA> gained 5.5 percent, boosted by planned
increases in French electricity tariffs, while French water and
waste management group Veolia Environnement <VIE.PA> surged 9
percent after it raised its 2008 sales growth target.
At 0835 GMT, the FTSEurofirst 300 <> index of top
European shares was up 0.5 percent at 1,198.85 points, rising
for the third consecutive session.
Financial markets were also bracing for interest rate
decisions by both the European Central Bank and the Bank of
England, expected during the session.
The ECB, at 1145 GMT, and the BoE, at 1100 GMT, are expected
to keep rates steady and investors will watch any rhetoric from
the banks to gauge how they are balancing growth and inflation
concerns.
"We're going to closely look at Trichet's wording," said
Philippe Gijsels, senior equity strategist at Fortis Bank, in
Brussels.
"The market is clearly hoping that he will come with a
statement indicating that not only is the bank not going to hike
interest rates, but also that it sees the possibility of
lowering them, not immediately but toward the end of the year or
the beginning of 2009."
Belgian-French financial services group Dexia SA <DEXI.PA>
<DEXI.BR> sank 6.6 percent after unveiling an overhaul of its
U.S. bond insurance unit FSA following its second-quarter losses
that pushed Dexia's net profit sharply lower.
Allianz <ALVG.DE>, Europe's biggest insurer, fell 1.5
percent after it abandoned its profit targets and said new
guidance was impossible given financial market turmoil that kept
its Dresdner Bank firmly in the red in the second quarter.
Dutch insurer Aegon NV <AEGN.AS> dropped 4 percent after
reporting a 58 percent fall in quarterly profit, hurt by
impairments on U.S. credit and subprime mortgage investments.
Among banks, British bank Barclays Plc <BARC.L> gained 3
percent after reporting a 33 percent drop in first-half profits
as it took a 2 billion pound writedown on the value of risky
assets, but the profit drop was not as steep as expected.
Also on the upside, AXA <AXAF.PA> rose 5.5 percent after the
French insurer posted a smaller-than-expected drop in first-half
profit and said it did not need to raise capital.
Energy shares were on the rise, as oil prices ticked higher
after a recent sharp drop. Total <TOTF.PA> gained 1.4 percent
and BP <BP.L> rose 1.7 percent.
Around Europe, Germany's DAX index <> rose 0.5
percent, UK's FTSE 100 index <> gained 0.6 percent and
France's CAC 40 <> added 1 percent.
Deutsche Telekom <DTEGn.DE> gained 1.8 percent after posted
slightly lower second-quarter core profit and sales, in line
with expectations.
Nestle <NESN.VX>, the world's largest food company, was down
0.1 percent after the group's first-half results failed to
impress investors.
The FTSEurofirst 300 is down 21 percent on the year, hit by
inflation worries, fears of a U.S. recession as well as concerns
over the banking sector, but the index has gained 9.7 percent
since touching a multi-year low in mid-July, helped by
better-than-feared corporate results and a sharp retreat in oil.
"What we need to see is a confirmation that the drop in oil
prices is not just a correction but a reversal in trend... a
confirmation that we're getting closer to the end of the credit
crisis...and finally we would like to see a long-term technical
buy signal in the market," Gijsels said.
"Until these three conditions are met, for us this will
remain nothing more than a bear market rally."
(Reporting by Blaise Robinson; Editing by Richard Hubbard)
