European stocks rise, led by banks and commodities

                                
* FTSEurofirst 300 up 0.75 pct
* Banks gain await U.S. stress test results
* Adidas slumps after Q1 profit falls
                                
 By Joanne Frearson
                                
 LONDON, May 5 (Reuters) - European shares rose in early
trade on Tuesday with financials the biggest gainers on hopes
that the results of U.S. government stress tests on banks would
reveal only modest shortfalls for the sector.
                                
 By 0847 GMT, the pan-European FTSEurofirst 300 <.FTEU3>
index of top shares was up 0.75 percent at 849.20 points.
                                
 "The general tone is positive so the bulls will have it
today but the bears are still lurking around the corner. ...
Everything is going to be dominated by what happens to the bank
stress test on Thursday," said Justin Urquhart Stewart, director
at Seven Investment Management.
                                
 "A lot of the stress test is designed for public consumption
to try and give people confidence that the banks are going to be
viable. The question is which of them is going to need capital
to be able to survive," he said.
                                
 Banks were among the biggest movers. Swiss bank UBS
<UBSN.VX> was up 2.8 percent after its finance head said that
its capital position was strong compared with rivals. The group
confirmed it had posted a net loss of 2 billion Swiss francs
($1.76 billion) and said it remained cautious. [ID:nL5170687]
                                
 HSBC <HSBA.L>, Standard Chartered <STAN.L> and Societe
Generale <SOGN.PA> gained 2.5-5.2 percent.
                                
 U.S. regulators have been poring over the holdings of the 19
largest U.S. banks to determine if they have enough capital to
withstand further shocks.
                                
 Banks are expected to be briefed on Tuesday on the final
results, which will be published on Thursday.
                                
 A source familiar with official talks told Reuters about 10
would be told they need to increase the size of their capital
cushions. [ID:nN04400200]
                                
 "The stress test looks like it will be a lot more benign
than it did (earlier) and the U.S. banks index was up sharply so
we're playing a bit of catch-up," a trader said of rises in
British bank stocks. UK markets were closed on Monday for a bank
holiday.
                                
Across Europe, the FTSE 100 <.FTSE> index was up 2.4 percent,
Germany's DAX <.GDAXI> was down 0.6 percent and France's CAC 40
<.FCHI> was down 0.5 percent.
                                
 
                                
 XSTRATA LIFTS MINERS; ADIDAS SLUMPS ON Q1
                                
 Miners were higher. Xstrata <XTA.L> was up 8.7 percent after
it posted a 7.7 percent rise in first-quarter production of
coal, its most profitable commodity, but output of many other
products declined amid weak demand and low prices. [ID:nL1173794]
                                
 Rio Tinto <RIO.L> was 5.1 percent higher. The Financial
Times reported on Monday that a senior executive of Chinese
metals firm Chinalco stood by a planned $19.5 billion tie-up
with the global miner amid speculation Rio might try to revise
part of the deal to win shareholder support.  [ID:nSYD488655]
                                
 Energy stocks also performed well. BG Group <BG.L>, BP
<BP.L>, Premier Oil <PMO.L> and Cairn Energy <CNE.L> were up
1.3-4.2 percent.
                                
 On the downside, Adidas <ADSG.DE> slumped 9.5 percent after
the group said its first-quarter operating profit fell nearly 80
percent to 58 million euros, worse than the average analyst
forecast of 179 million in a Reuters poll. [ID:nL4292253] 
                                
 French telecoms equipment maker Alcatel-Lucent <ALUA.PA>
fell 5.8 percent after it swung to a bigger-than-expected
first-quarter adjusted operating loss but stuck to its target
for around breakeven this year. [ID:nL4365142]
                                
 Metro <MEOG.DE>, the world's fourth largest retailer, lost
5.2 percent, after it reported a worse than expected 49.3
percent slump in first-quarter underlying operating profit as
currency devaluations in Eastern Europe weighed. [ID:nFAB013084]
                                
 Turning to economic news, at 1400 GMT, investors will focus
on the Institute for Supply Management's April non-manufacturing
index with economists in a Reuters survey forecast a reading of
42.0 versus 40.8 in March.
                                
"As we had a stronger-than-expected manufacturing ISM on
Friday there is a hope that the services sector of the economy
is also going to say things are not so bad," said Jim
Wood-Smith, head of research at Williams de Broe.
                                
 "I think it has scope to disappoint on the downside because
the consensus is that it is going to tick up again from last
November's lows. But, services arguably being later cycle has
got more scope to miss on the downside," he said.
                                
 Later in the week, on Thursday investors are likely to focus
on both the outcome of the Bank of England and the European
Central Bank rate decision meetings, while Friday sees the
release of U.S. nonfarm payrolls.
                                
(Additional reporting by Simon Falush; Editing by Hans
Peters)