Banks, utilities power Europe shares to end higher

                                
 * FTSEurofirst 300 index ends 1.1 percent higher
                                
 * Financials advance ahead of Federal Reserve's meeting
                                
 * E.ON's impressive results boost utility shares
                                
 
                                
 By Atul Prakash
                                
 LONDON, Aug 12 (Reuters) - European shares ended higher on
Wednesday after slipping in the past two days, with impressive
results from E.ON <EONGn.DE> boosting utilities and banks up
ahead of Federal Reserve statements on the state of the U.S.
economy.
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
was up 1.1 percent at 942.06 points. The index, which slumped 45
percent last year, is up 13 percent in 2009 and has surged 46
percent since March's lifetime low.
                                
 Germany's E.ON rose 5.4 percent after the world's largest
utility said it saw signs that demand for energy was stabilising
after a prolonged slump and tweaked its 2009 outlook higher
after first-half profits beat forecasts.
                                
 "For the reminder of this year, this kind of profitability
story is the main driver for people to revise next year's
earnings forecasts higher and that's positive for the market,"
said Franz Wenzel, strategist at AXA Investment Managers.
                                
 "Equity markets could easily go higher by about 5 percent in
the short term," he added.
                                
 The DJ STOXX European Utilities Index <.SX6P> was among the
top sectoral gainers, up 2.6 percent. GDF SUEZ <GSZ.PA>,
Centrica <CNA.L>, RWE <RWEG.DE> and Severn Trent <SVT.L>
advanced between 1 percent and 4.3 percent.
                                
 Financial stocks were also among significant gainers ahead
of the outcome of the U.S. Federal Reserve's policy-setting
committee meeting at 1815 GMT, which is expected to hold its
benchmark overnight rate in a range of zero to 0.25 percent.
                                
 The DJ STOXX banking index <.SX7P> was up 1.3 percent, while
Barclays <BARC.L>, Royal Bank of Scotland <RBS.L>, BNP Paribas
<BNPP.PA> and Natixis <CNAT.PA> rose between 2.1 and 5.4
percent.
                                
 "I don't think you are going to get anything negative out of
the Fed today. What you want to see is a central bank that is
not going to take any risks on the deflationary side and
withdraw policy earlier," said Bernard McAlinden, a strategist
at NCB Stockbrokers.
                                
 UBS AG <UBSN.VX> gained 3.1 percent after news that the
Swiss bank and the U.S. government have agreed to settle a
long-running dispute over the disclosure of names of wealthy
American bank clients suspected of tax evasion. [ID:nN1296068]
                                
 Britain's Lloyds <LLOY.L> was up 6.4 percent. The bank said
it would sell the bulk of its Insight Investment unit to Bank of
New York Mellon <BK.N> for 235 million pounds ($386 million) as
part of a shake-up of its asset management units.
                                
 
                                
 EUPHORIA
                                
 Investors digested a slew of economic news. The Bank of
England said Britain's worst recession in decades would end
early next year, but it would take time for the gross domestic
product (GDP) to return to pre-crisis levels, pushing
unemployment up from the current 13-year high. [ID:nLC556026]
                                
 "There is a kind of euphoria starting to build in. The
markets are ignoring negative news and much more focusing on
positive news," Wenzel said.
                                
 The U.S. trade deficit widened in June to $27 billion, as
goods imports rose for the first time in 11 months, and euro
zone industrial output fell in June against May, defying
expectations of a small rise. [ID:nLC145627] [ID:nONS004429]
                                
 Commodity shares were in demand as crude and metals prices
rose. Royal Dutch Shell <RDSa.L>, BG Group <BG.L>, Tullow Oil
<TLW.L>, Repsol <REP.MC>, Total <TOTF.PA> and StatoilHydro
<STL.OL> added 1.6 to 4.9 percent.
                                
 Among miners, BHP Billiton <BLT.L>, Anglo American <AAL.L>,
Antofagasta <ANTO.L> and Xstrata <XTA.L> rose 0.5-2.8 percent.
                                
 Volkswagen <VOWG.DE> and Porsche <PSHG_p.DE> were up 0.7
percent and 1.3 percent, respectively. They have broadly agreed
on details for a deal to combine two of Europe's automakers, two
VW supervisory board members told Reuters. [ID:nLC628450]
                                
 Among the losers, Nestle <NESN.VX>, the world's biggest food
group, fell 4.4 percent as the company pared its full-year
outlook after missing forecasts with first-half organic sales
growth of 3.5 percent. [ID:nLC195886]
                                
 Across Europe, Britain's FTSE 100 <.FTSE> index, Germany's
DAX <.GDAXI> and France's CAC 40 <.FCHI> were up 1-1.5 percent.
 (Additional reporting by Christoph Steitz in Frankfurt; editing
by Karen Foster)