* FTSEurofirst 300 rises 0.3 percent
* Drugmakers gain on defensive qualities
* Some banks bounce after slumping on Monday
By Brian Gorman
LONDON, Jan 20 (Reuters) - European shares rose in early
trade on Tuesday, with recently battered British banks staging a
recovery and pharmaceuticals gaining due to their defensive
appeal.
At 0951 GMT the pan-European FTSEurofirst 300 index <>
was up 0.3 percent at 793.86 points. The index of top European
shares dropped 1.6 percent on Monday.
Analysts said there was no reason for sustained optimism
following plunges in banking stocks on Monday, when Royal Bank
of Scotland <RBS.L> said it would post a massive 2008 loss and
fears of bank nationalisation swirled.
"After yesterday's carnage, the smoke is still hanging over
the market," said Justin Urquhart Stewart, investment director
at Seven Investment Management.
The FTSEurofirst 300 has fallen more than 47 percent since
the start of 2008, hit by a credit crisis that has contributed
to several major economies going into recession.
Shares in British banks, the biggest losers on Monday,
bounced back. RBS rose 15.5 percent, while Barclays <BARC.L>,
HSBC <HSBA.L>, and Lloyds <LLOY.L>, gained between 1 and 7.7
percent.
Drugmakers continued to gain due to their defensive
qualities. GlaxoSmithKline <GSK.L>, Novartis <NOVN.VX>, Shire
<SHP.L>, AstraZeneca <AZN.L>, Roche <ROG.VX> and Sanofi-Aventis
<SASY.PA> all rose between 0.9 and 1.4 percent.
AstraZeneca has risen more than 30 percent since the
beginning of last year.
Oil companies Total <TOTF.PA>, ENI <ENI.MI>, BP <BP.L> and
Royal Dutch Shell <RDSa.L> were up between 1 and 1.8 percent,
despite lower oil prices.
Crude prices <CLc2> slipped below $40 a barrel, amid worries
about weaker demand due to the worldwide slowdown.
BURBERRY RISES
British luxury goods group Burberry <BRBY.L> rose 12.3
percent after beating third-quarter revenue forecasts, helped by
heavy discounting, although it said it would cut around 540 jobs
in Britain and Spain to protect profit in tough trading
conditions.
Shares in Continental <CONG.DE> rose 4.4 percent as traders
pointed to a newspaper report that privately held bearings maker
Schaeffler, which owns half of the auto parts and tyre maker,
plans a sweeping supervisory board reshuffle.
The company said it expects 2008 sales to be about 25
billion euros.
British consumer price inflation fell by its biggest margin
since April 1992 in December, but less sharply than analysts had
forecast, data from the Office for National Statistics showed.
The headline rate of consumer price inflation slowed to 3.1
percent from 4.1 percent, its lowest since April 2008, but still
above the Bank of England's 2 percent target.
Across Europe, Britain's FTSE 100 <>, Germany's DAX
<> and France's CAC-40 <> were up between 1.3 and 1.8
percent.
Sterling <GBP=>, which hit a 7-1/2-year low against the
dollar earlier in the day, pared losses after the report.
Wall Street futures indicated a weak start. Futures for the
Dow Jones <DJc1>, S&P 500 <SPc1> and Nasdaq <NDc1> were down
between 0.2 and 0.5 percent.
U.S. markets were closed on Monday for a holiday. Barack
Obama will be sworn in as U.S. President later in the day.
Urquhart Stewart said that when Obama gets down to financial
details in speeches in the coming days, that could be a catalyst
for the market.
(Additional reporting by Rebekah Curtis; Editing by Mike
Nesbit)
