* FTSEurofirst 300 <> index closes up 2.8 percent
* Index off 12.7% in October, worst fall since Sept. 2002
* Drugs, oils gain; most banks rally
By Brian Gorman
LONDON, Oct 31 (Reuters) - European shares closed higher on
Friday, the fourth day of gains, boosted by oils and drug
companies and a late recovery for banks, though Barclays
<BARC.L> tumbled after selling a stake to Middle East investors.
The FTSEurofirst 300 <> index of leading European
companies closed 2.8 percent higher at 928.81 points.
The index rose 11.9 percent over the week, but fell 12.7
percent in October, its worst fall since September 2002, as a
credit crisis and the resulting economic slowdown weighed
heavily on investors' minds.
"The general consensus is that it's a dead cat bounce. But
it's too early to say. There's a lot of positive signals coming
from any kind of valuation-based approach," said Gareth
Williams, European equity strategist at ING.
"But there are negative signals from the economy. The market
may have to test the lows again before investors believe in the
rally. The US election next week may be a catalyst for better
sentiment."
He added: "Profit warnings and dividend cuts are not
helping."
Drugmakers were in demand for their defensive quality, with
GlaxoSmithKline <GSK.L> adding 4.4 percent, Roche <ROG.VX>
jumping 9.6 percent, Novartis <NOVN.VX> putting on 5 percent and
Shire <SHP.L> rising 4.5 percent.
Williams expects rate cuts in the UK and Europe next week,
but says they are priced in.
Oils bounced from yesterday's losses, despite a 2.7 percent
decline in the crude price <CLc1> to $64.22 a barrel. Total
<TOTF.PA>, BP <BP.L> and Royal Dutch Shell <RDSa.L> rose between
2.5 and 4.2 percent.
Banks rallied late in the day although Barclays was 12.8
percent lower after the British bank said it was receiving $12.1
billion from investors from Qatar, Abu Dhabi and elsewhere to
avoid taking UK government rescue cash.
The shares initially rose, but analysts said there was
concern it was more costly than cash on offer from the UK
government's bailout plan.
HSBC <HSBA.L> sank 4.3 percent after a Goldman Sachs
downgrade.
Germany's Commerzbank <CBKG.DE> lost 6.2 percent after
sources familiar with the situation said Germany may take a
stake in the country's second-biggest bank, which is grappling
with the fallout from the global financial crisis.
Anglo Irish <ANGL.I> and Bank of Ireland <BKIR.L> rose 23.1
and 40 percent respectively on bargain hunting after recent
weakness, while Banco Santander <SAN.MC> gained 5.4 percent and
Credit Agricole <CAGR.PA> jumped 8.9 percent.
Across Europe, Britain's FTSE 100 <>, France's CAC-40
<> rose and Germany's DAX <> rose between 2 and 2.4
percent.
BT PLUNGES
The telecoms sector was one of just five to fall, led by
Britain's BT <BT.L>, which plunged 19 percent after the company
said it would miss earnings forecasts for its second quarter due
to a poor performance at its Global Services unit.
This was the largest fall in BT since the company's shares
entered the FTSE 100 in March 1985, according to Reuters data.
Within the sector, Cable & Wireless <CW.L> slipped 1 percent
and Swisscom <SCMN.VX> fell 1.4 percent.
Carmaker Renault <RENA.PA> fell 1 percent, after its 44
percent subsidiary Nissan Motor Co <7201.T> said it was
undecided on its dividend payout after a near 48 pct fall in
first-half operating profit.
The Dow Jones <>, S&P 500 <.SPX> and Nasdaq Composite
<> indexes were up 1.2 to 1.4 percent as European bourses
closed, despite a report from the U.S. Commerce Department
showing consumer spending shrank by 0.3 percent in September,
the first drop in two years.
U.S. consumer sentiment suffered its steepest monthly drop
on record in October. The Reuters/University of Michigan Surveys
of Consumers said its final reading of its index of confidence
plunged to 57.6 in October from 70.3 in September.
(Additional reporting by Amanda Cooper; Editing by Greg
Mahlich)
