* FTSEurofirst 300 up 2.4 pct
* Euro STOXX 50 breaks above key retracement level
* Wall Street set to rise after holiday
* For up-to-the-minute market news, click on []
By Brian Gorman
LONDON, July 6 (Reuters) - European shares were sharply
higher at midday on Tuesday in a broad rally, which strategists
said was due to stocks becoming cheap after a period of
weakness.
At 1056 GMT, the FTSEurofirst 300 <> index of top
European shares was up 2.4 percent at 989.94 points, after
hitting its lowest close since late May on Monday. The index is
still down more than 11 percent from its mid-April peak on
worries about the strength of the global economic recovery.
The Euro STOXX 50 <>, the euro zone's blue-chip
index, rose 2.9 percent to 2,580.41 points, breaking through
2,555.84, a key 38.2 percent Fibonacci retracement of the
index's rise from its March 2009 low to its peak in January
2010.
Miners were among shares to bounce the most after recent
weakness. They were also helped by higher metals prices, as the
dollar weakened against the euro.
Anglo American <AAL.L>, Kazakhmys <KAZ.L>, Lonmin <LMI.L>
and Rio Tinto <RIO.L> rose between 3.6 and 5.7 percent.
ArcelorMittal <ISPA.AS>, the world's largest steel maker, rose
6.3 percent.
"The market had got down to quite an oversold level," said
Colin McLean, managing director at fund manager SVM in
Edinburgh. "Individual stocks are down at support levels in
terms of moving averages, and could bounce a bit."
"The fall has been a bit indiscriminate over the past few
weeks."
However, he said the increased profits companies were
expected to report, as the second-quarter earnings season begins
this month, were already factored in by markets.
In the heavyweight banking sector, gainers included Banco
Santander <SAN.MC>, Barclays <BARC.L> and Credit Agricole
<CAGR.PA>, up between 4.2 and 5.6 percent.
The banking sector's stress tests were still in focus on
Tuesday, after sources told Reuters that European Central Bank
President Jean-Claude Trichet will meet Europe's top banks to
discuss the tests ahead of the publication of the results later
this month.
SVM's McLean said: "Until we understand more about the
stress tests, that's casting a shadow over the markets."
Around Europe, UK's FTSE 100 index <>, Germany's DAX
index <> and France's CAC 40 <> were up between 2 and
2.8 percent.
BP EXTENDS GAINS
Among individual companies, BP <BP.L> rose 3.2 percent,
adding to a 3.5 percent gain on Monday. The company has
approached sovereign wealth funds with a view to securing an
investor to fend off takeover bids while it deals with its
massive U.S. oil spill, a senior United Arab Emirates source
said on Tuesday. []
It was also helped by RBS upgrading its recommendation on
the stock to "buy" from "hold", on valuation grounds. BP is
still down more than 47 percent from its April peak.
Stock index futures pointed to a higher open for Wall
Street, where trading resumes after Monday's holiday. Futures
for the Dow Jones <DJc1>, S&P 500 <SPc1> and Nasdaq <NDc1> were
up between 1 and 1.6 percent.
Investors are likely to closely monitor the U.S. ISM
non-manufacturing report, due at 1400 GMT, for further clues on
the state of the economy, following recent weaker-than-expected
labour and other data.
(Editing by Erica Billingham)
