Nokia, banks lead rally in European stock markets

                                
 By Peter Starck
                                
 FRANKFURT, March 25 (Reuters) - European stocks rose on
Tuesday, led by Nokia <NOK1V.HE>, after a top executive said the
mobile phone maker had not felt much of an impact from the U.S.
economic slowdown, and with banks' strong tracking Wall Street.
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
closed 3.2 percent higher at 1,266.03 points, narrowing its
losses so far this year to 16 percent.
                                
 Nokia advanced 8.2 percent after Chief Financial Officer
Rick Simonson was quoted as having told Bloomberg Television
that the company had not felt much of an impact from the U.S.
downturn.
                                
 Chipmaker Infineon <IFXGn.DE>, for which Nokia is an
important customer, rose 10.5 percent.
                                
 The DJ Stoxx technology index <.SX8P> was the best sectoral
performer with a rise of 6.4 percent as Nokia's leap late in the
session gave a boost that helped offset an earlier Morgan
Stanley downgrade of the sector to "underweight" from "neutral".
                                
 Financials held centre stage for most of the day in the wake
of solid gains in U.S. stocks on Monday after investment bank
JPMorgan <JPM.N> raised its offer for rival Bear Stearns <BSC.N>
to $10 a share from $2 in a deal backed by the Federal Reserve.
                                
 In Europe, HBOS <HBOS.L> rose almost 15 percent, Royal Bank
of Scotland <RBS.L> added over 9 percent and UBS <UBSN.VX>
climbed more than 8 percent.
                                
 "We are catching up with yesterday's gains in the United
States, that's why Europe is strong today," a trader said.
"(European) banks are up because of the Bear Stearns deal."
                                
 "The upswing for the banks does not necessarily signal a
return of confidence but the increased offer (for Bear Stearns)
has reduced the perceived risk of collapse in the financial
sector," the trader, based in Scandinavia, said.
                                
 Another trader attributed much of Tuesday's gains,
especially in bank shares, to short-covering. "It's not your
average pension fund loading up," this trader said.
                                
 The DJ Stoxx European banks index <.SX7P> rose 4.7 percent,
trimming its year-to-date losses to some 18 percent after a
similar fall during 2007, driven by massive writedowns at top
banks sparked by the U.S. subprime mortgage crisis.
                                
 
                                
 GROWTH WORRIES
                                
 Financial industry worries have spread to the wider economy,
especially in the United States, pushing down the dollar and
denting earnings growth prospects also for European companies.
                                
 U.S. data showed consumer confidence at a five-year low in
March on worries over rising inflation and fewer jobs, with a
record drop in home values in January providing additional cause
for their woes.
                                
 In Europe, strategists and traders said Tuesday's advance,
coming after a four-day Easter break, might prove short-lived.
                                
 "The worry is still out there that this rally may prove to
be nothing but yet another false dawn," IG Index said.
                                
 "This year's decline has been punctuated by strong rallies
along the way which have ultimately proved to be 'dead cat
bounces' which ran out of steam," it said in a market comment.
                                
 The Scandinavia-based trader said: "It's probably not a
sustained upturn. I wouldn't be surprised if we'll see
profit-taking tomorrow, or something else that will make the
markets nervous."
                                
 And Goldman Sachs said in a strategy note that "it is still
too early to be sure that the worst is over". It cited as a
positive the tightening in credit spreads, which on Tuesday saw
Europe's investment-grade iTraxx index <ITRAC5EA=GFI> narrow 21
basis points to 111 basis points.
                                
 "Given this rally in credit, declines in swap spreads and
the calming of fears of a run on major financial institutions
that built a couple of weeks ago, the re-rating of financial
equities also makes sense, as one component of systemic risk
that the market had feared has been brought back under control,"
Goldman Sachs said in a note.
                                
 Around Europe, Britain's FTSE 100 index <.FTSE> and the
French CAC 40 <.FCHI> both rose 3.5 percent while Germany's DAX
<.GDAXI> and Switzerland's SMI <.SSMI> both gained 3.2 percent.
                                
 Mining shares climbed on the back of a bounce in prices of
industrial metals, with Kazakhmys <KAZ.L> and Vedanta <VED.L>
each up 7.5 percent, Xstrata <XTA.L> up 6.7 percent, Anglo
American <AAL.L> up 6.3 percent and BHP Billiton <BLT.L> up 5.1
percent.
                                
 Elsewhere, shares in Aker Yards <AKY.OL> shot up 29 percent
after the Norwegian shipbuilder agreed to sell 70 percent of
three merchant vessel yards to Russian-owned investment firm FLC
West for $450 million.
 (Additional reporting by Blaise Robinson in Paris and Sitaraman
Shankar in London; Editing by David Cowell)