* FTSEurofirst rises 1.2 percent
* Energy adds most points on back of higher oil price
* China PMI above 50, lifting basic resources
By Peter Starck
FRANKFURT, July 1 (Reuters) - European shares rose early on
Wednesday as energy stocks drew strength from higher oil prices
and Chinese economic data gave a lift to resource stocks such as
steelmaker ArcelorMittal <ISPA.AS>.
By 0917 GMT, the pan-European FTSEurofirst 300 <>
index of top shares was up 1.2 percent at 860.09 points, boosted
also by banks, notably Commerzbank <CBKG.DE> which shot up on
news of a political deal giving German banks greater scope than
before to rid balance sheets of toxic assets.
The European benchmark index rose 2.2 percent in the first
half of 2009 thanks to a gain of 15.9 percent in the second
quarter, after hitting a lifetime low on March 9.
The second-quarter rally came to a halt by mid-June and the
FTSEurofirst has remained range-bound since then. It fell 1.1
percent on Tuesday.
"Some investors seem to be ready to buy on the dips," said
LBBW analyst Michael Koehler.
"There is no clear downward dynamic," he added.
Other strategists said many investors appeared to be on
hold, awaiting the U.S. second-quarter corporate earnings season
kicking off with bellwethers such as Alcoa <AA.M> on July 8 and
Intel <INTC.O> and Johnson & Johnson <JNJ.N> on July 14.
"Q2, 2009 earnings revisions have now turned positive with
the season only a week away, a striking contrast to recent
seasons where estimates declined coming into reporting," Goldman
Sachs said in a research note.
That, said JPMorgan, was making investors cautious.
"The view is that (consensus earnings) expectations have
moved too far too fast, setting the scene for a disappointment,"
JPMorgan said in a June 30 strategy note.
Oil & gas <.SXEP> added the most points to the FTSEurofirst
early on Wednesday, with Royal Dutch Shell <RDSa.L>, BP <BP.L>
and Total <TOTF.PA> up between 1.7 percent and 1.8 percent.
Oil <CLc1> rose above $71 a barrel after a fall in U.S.
crude stocks buoyed hopes of a demand recovery. []
China's manufacturing sector extended its recovery in June,
its official purchasing managers' index consolidating for the
fourth month above the watershed mark of 50. []
RESOURCES RALLY
In European stock markets, basic resources was the strongest
sector, up 3 percent on the DJ Stoxx index <.SXPP>, led by
ArcelorMittal, up 2.8 percent, and miner Rio Tinto <RIO.L>.
Rio was up 3.5 percent. A source briefed on the matter told
Reuters that China's state-owned Chinalco was likely to
participate in Rio's $15.2 billion rights offer. []
Steelmaker ThyssenKrupp <TKAG.DE> rose 3.1 percent.
Banking <.SX7P> was the second strongest sector measured by
points contribution. Commerzbank climbed 16.7 percent, BNP
Paribas <BNPP.PA> was up 2 percent and Barclays <BARC.L> rose
1.4 percent.
Standard Chartered <STAN.L> added 1.0 percent. A source with
direct knowledge of the matter said StanChart was in talks to
purchase assets in China and India owned by the Royal Bank of
Scotland (RBS) <RBS.L>, whose shares rose 1.1 percent.
The DJ Stoxx retail index <.SXRP> rose 1.8 percent, with
Marks & Spencer <MKS.L> up 4.3 percent after the British
retailer reported a smaller-than-expected drop in first-quarter
underlying sales and said consumer spending seemed to be
stabilising. []
Telecoms <.SXKP> rose on the back of an upgrade of the
European sector to "overweight" from Credit Suisse, which said
that telecoms have the highest 2009 free cash flow yield and
highest dividend yield of any European sector.
BT Group <BT.L> traded 3.4 percent higher, Vodafone <VOD.L>
was up 1.7 percent, France Telecom <FTE.PA> put on 2.1 percent
and Deutsche Telekom <DTEGn.DE> rose 1.3 percent.
Losing 5.9 percent, telecoms was one of the three weakest
sectors in Europe in the first half of 2009. []
Later in the day, the focus will be on the U.S.
private-sector ADP employment report at 1215 GMT and the U.S.
Institute for Supply Management's (ISM) index of national
factory activity at 1400 GMT.
(Editing by Hans Peters)
