European stocks hit highest close since mid-Jan

                                
 * FTSEurofirst 300 ends 0.5 percent higher 
                                
 * Highest close in nearly four months, banks support
                                
 * StanChart jumps after results; miners advance
                                
 
                                
 By Atul Prakash
                                
 LONDON, May 5 (Reuters) - European shares hit their highest
level in nearly four months on Tuesday as banks jumped after
Standard Chartered <STAN.L> posted record quarterly profits and
on hopes that the capital shortfalls of U.S. banks due to be
revealed in this week's government stress test results will
prove manageable.
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
closed 0.5 percent higher at 846.81 points after hitting a high
of 854.46 -- the highest level since mid-January.
                                
 The benchmark has risen more than 30 percent from its March
9 lifetime low and is up nearly 2 percent so far this year after
a 45 percent slump in the whole of 2008.
                                
 StanChart surged 8.5 percent as it reaped the benefits of a
focus on Asia and a resilient loan book. The UK-listed bank,
which gets two-thirds of its revenue from Asia, said consumer
banking income had risen, mortgages had performed well and its
key wholesale arm had had an "excellent" quarter.
                                
 "Standard Chartered results were once again pretty positive.
As we head towards the U.S. stress test results for banks,
expectation in the market is that perhaps they won't need as
much capital as was thought earlier," said Henk Potts, equity
strategist at Barclays Stockbrokers.
                                
 Other banks also registered substantial gains. HSBC <HSBA.L>
jumped 7.4 percent, Barclays <BARC.L> was up 6.8 percent, Lloyds
<LLOY.L> was up 10.5 percent, Societe Generale <SOGN.PA> gained
8.2 percent and Royal Bank of Scotland <RBS.L> rose 9.1 percent.
                                
 UBS <UBSN.VX> remained wary on its immediate outlook as it
braced for the recession's full impact after a first quarter
loss, but its shares rose 2.3 percent as resilient capital
ratios cut the need for a balance sheet boost. [ID:nL5486645]
                                
 Despite a rally in European financials the focus remained on
the U.S. stress tests. The banks have been negotiating with the
regulators about the depth of their capital needs, should the
recession prove to be deeper and longer than anticipated.
                                
 According to a source familiar with official talks between
banks and regulators, about 10 of the 19 largest U.S. banks that
have been put through government stress tests will be instructed
by regulators to raise more capital. [ID:nN04395186]
                                
 Banks are expected to be briefed on Tuesday on the final
results, which will be published on Thursday.
                                
 "Sentiment remains positive ... For the bulls a couple of
U.S. events this week could prove to be a fly in the ointment --
the results of the stress tests on the banks and Friday's U.S.
unemployment numbers for April," Tim Hughes, head of sales
trading at IG Index said in a note.
                                
 "Normally the market would be cautious around these, but for
today at least traders seem happy to keep on ignoring any
potential for bad news, continuing to hope that both markets and
the wider economies have turned the corner."
 U.S. Federal Reserve Chairman Ben Bernanke told Congress the
three-year U.S. housing bust may be near a bottom and that he
expected the recession to end this year barring a relapse in the
financial crisis. [ID:nN05470010]
                                
 
                                
 U.S. TAX OVERHAUL PLANS 
                                
 The markets also took note of U.S. President Barack Obama's
vow on Monday to overhaul tax policies that he said reward
companies for shifting U.S. jobs overseas and allow wealthy
people to evade taxes using offshore accounts.
                                
 "The market will be looking at that but certainly won't be
panicking. We would wait for more details," said Potts.
                                
 The White House estimated the plan would save $210 billion
over the next decade. [ID:nN04390481]
                                
 Miners also had a good session, supported by a rise in
metals prices. BHP Billiton <BLT.L>, Anglo American <AAL.L>,
Antofagasta <ANTO.L>, Rio Tinto <RIO.L>, Xstrata <STA.L> and
Eurasian Natural Resources <ENRC.L> rose 1.7-9 percent.
                                
 German Metro <MEOG.DE>, the world's fourth-largest retailer,
fell 3.8 percent after it said first-quarter profit had halved
in the worst slump since the Great Depression, and shied away
from giving a detailed outlook.
                                
 Hannover Re <HNRGn.DE> fell 1.9 percent. The world's
fourth-biggest reinsurer has turned more wary about the outlook
for capital markets this year, making its annual earnings goal
tougher to reach despite forecast-beating profit in the first
quarter. [ID:nL5611804]
                                
 French telecoms equipment maker Alcatel-Lucent <ALUA.PA>
posted bigger-than-expected first-quarter losses as slowing
economic growth hurt demand, sending its shares sharply lower.
Its shares were almost flat.
                                
 Across Europe, Britain's FTSE 100 <.FTSE> was up 2.2
percent, Germany's DAX <.GDAXI> fell 1 percent and France's CAC
40 <.FCHI> was 0.4 percent lower.
 (Editing by Greg Mahlich)