* FTSEurofirst 300 rises 0.3 pct in brisk volume
* Index up 7.6 pct in 3 weeks, breaks above 50-day m.a.
* Bank index has P/E ratio of 8.6, well below 10-yr average
* For up-to-the-minute market news, click on []
By Blaise Robinson
PARIS, April 6 (Reuters) - European stocks rose on
Wednesday, adding to their three-week rally as investors looked
beyond the European Central Bank's expected rate rise, brushing
aside Portugal's debt woes and piling into recently-hit banks.
The FTSEurofirst 300 <> index of top European shares
ended 0.3 percent higher at 1,147.24 points in strong volume,
gaining ground for the 13th time in 15 sessions and closing
above its 50-day moving average for the first time since early
March, fuelling expectation of more gains.
The volume on the FTSEurofirst 300 represented 135 percent
of the index's 90-day average daily volume, making the session
the 9th most active day so far this year.
The benchmark index, which has surged 7.6 percent over the
past three weeks, is still down 3.7 percent from a 29-month high
reached in mid-February, before violence in Libya and Japan's
nuclear crisis dampened investor appetite for risky assets such
as equities.
Banking stocks, which had missed the broad market's recovery
run that started in mid-March, featured among the top gainers on
Wednesday, staging a catch-up rally on the eve of the ECB's
interest rate decision and comments.
The central bank is widely anticipated to raise its
benchmark rate by 25 basis points on Thursday afternoon, its
first hike since July 2008, and follow that with other rate
hikes later in the year. <ECBWATCH>
"We've had aggressively low rates for a while, and raising
them at this point means we're back to a more normal
environment, so that's good news," said Marc Renaud, president
and fund manager at Paris-based Mandarine Gestion, which has 1.8
billion euros ($2.6 billion) in assets under management.
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"There's been hypersensitivity on the market and especially
on banks, but at the end of the day, risks related to sovereign
debt have been exaggerated and banking stocks have been
excessively hammered," Renaud said.
BBVA <BBVA.MC> rose 3.2 percent, HSBC <HSBA.L> added 2
percent and Societe Generale <SOGN.PA> gained 2.8 percent.
Despite the market's brisk three-week rally, European stocks
remained relatively cheap. Europe's broad STOXX 600 index
<> carries a forward price-to-earnings (P/E) ratio of
10.6, well below its 10-year average of 13.6, according to
Thomson Reuters Datastream.
Europe's STOXX bank index <.SX7P>, which has been dragged by
fresh fears of rights issues in the sector, carries a P/E ratio
of 8.6, well below a 10 year average of 13.1.
In a sign that risk appetite continued to recover on
Wednesday, the Euro STOXX 50 volatility index <.V2TX> fell 1.8
percent to a near two-month low.
Investors were relieved to see Portugal placing all of its
1-billion euro T-bill auction despite a threat by local banks to
stop buying government debt, and brushed aside concerns over the
sharp rise in yields. []
Despite the overall positive mood, however, some market
players said the banking sector's tentative rally could be
short-lived.
"Many hedge funds have been short, generally, on banks as a
sector, and there's a bit of short-covering gone on today which
has caused some slightly more violent moves than really is
justified," a London-based trader said.
"I don't see a lot of follow through on this bounce at the
moment. Our head of trading has been indicating that people will
be trying to sell into these bounces," he said.
(Reporting by Blaise Robinson; Additional reporting by Simon
Jessop in London; Editing by Jon Loades-Carter)
