Europe stocks edge higher; BP up, financials fall

                                
 * FTSEurofirst 300 index up 0.2
                                
 * Oils gain; BP up as beats forecasts
                                
 * Financials fall; ING woes

By Joanne Frearson
                                
 LONDON, Oct 27 (Reuters) - European shares edged higher in
early trade on Tuesday, snapping a sharp three-day drop, with
energy stocks taking the lead after oil heavyweight BP's <BP.L>
third-quarter results beat forecasts.
                                
 By 0937 GMT, the pan-European FTSEurofirst 300 <.FTEU3>
index of top shares was up 0.2 percent at 998.60 points in a
choppy session, having been up as high as 1,001.81 points and
down as low as 996.15 points.
                                
 The index which is up 20 percent so far this year, has
gained 54 percent since reaching a floor in early March, helped
by improving macroeconomic data and better-than-expected
earnings.
                                
 "BP is ahead of expectations which is good news, but we have
had a strong market environment which obviously helped," said
Peter Dixon, economist at Commerzbank.
                                
 "Investors are still concerned about committing huge amounts
of cash to equities, they are not sure whether there is going to
be a bigger correction," he said.
                                
 Energy stocks added the most points to the index, with BP
gaining 4.7 percent.
                                
 The company beat third-quarter earnings forecasts by a big
margin as its cost-cutting programme proved more successful than
expected, prompting the British oil major to increase its target
for savings for the year. [ID:nLQ683027]
                                
 BG Group <BG.L>, Royal Dutch Shell <RDSa.L> and Total
<TOTF.PA> were 0.6 to 1.5 percent higher.
                                
 Industrial engineers were in demand. Vestas Wind <VWS.CO>
soared 10 percent after it reported a bigger-than-expected rise
in operating profits for the third quarter. [ID:nDKT004679]
                                
 
                                
 FINANCIALS FALL
                                
 Financials were under pressure on further market jitters
following Monday's news that Dutch bancassurer ING <ING.AS>
would split in two and launch a bumper rights issue. ING fell
6.8 percent.
                                
 Banks took the most points off the index. Royal Bank of
Scotland <RBS.L>, Lloyds Banking Group <LLOY.L>, Societe General
<SOGN.PA>, Barclays <BARC.L> and Standard Chartered <STAN.L>
were down 1.6 to 6.1 percent.
                                
 Chemical stocks were mostly on the downside. Shares in Akzo
Nobel <AKZO.AS> lost 7.8 percent after it warned that markets
still remain fragile as sales fell 10 percent.
                                
 But Bayer <BAYGn.DE> gained 0.5 percent after it reaffirmed
its full-year outlook and posted forecast-beating operating
earnings, helped by a continued recovery at its plastics
division. [ID:nLR366504]
                                
 Mining stocks were lower. Anglo American <AAL.L>,
Antofagasta <ANTO.L>, Vedanta Resources <VED.L>, Eurasian
Natural Resources Corporation <ENRC.L>, Rio Tinto <RIO.L> and
Xstrata <XTA.L> were down 0.9 to 5.6 percent.
                                
 Later in the session, investors will eye the U.S.
Case/Shiller Home Price Index for August at 1300 GMT and U.S.
Consumer Confidence figures, due at 1400 GMT.
                                
 "The S&P/Case-Shiller Home Price Index for August is the
most important thing today. There has been tentative signs that
it has bottomed, if it is up again then that would be positive,"
said Bernard McAlinden, strategist at NCB Stockbrokers.
                                
 Across Europe, the FTSE 100 <.FTSE> index was 0.02 percent
lower, Germany's DAX <.GDAXI> was down 0.03 percent and France's
CAC 40 <.FCHI> was up 0.1 percent.
 (Reporting by Joanne Frearson; Editing by Rupert Winchester)