Recovery in commodities helps steady Europe shares

                                
 By Amanda Cooper
                                
 LONDON, May 21 (Reuters) - European shares edged up on
Wednesday led by a recovery in mining and energy shares, as the
market attempted to stabilise after its worst sell-off in two
months.
                                
 BP <BP.L> was the largest individual positive influence on
the broader market, rising 2.5 percent, while Royal Dutch Shell
<RDSa.AS> rose 3 percent and Total <TOTF.PA> 1.7 percent.
                                
 Energy shares fell 2 percent on Tuesday <.SXEP>, while
miners <.SXPP> fell by nearly 6 percent. Rio Tinto <RIO.L> and
BHP Billiton <BLT.L> reversed some of the previous day's
declines to rise 2 percent and 1.8 percent, respectively.
                                
 By 0835 GMT the FTSEurofirst 300 index <.FTEU3> of top
European shares was up 0.17 percent at 1,352.82 points. The
ratio of declining stocks to advancers was roughly one to one.
                                
 Crude oil topping $129 a barrel on Tuesday deepened investor
concerns about the spread of inflation because of the surge in
commodity prices, though this has made basic resources stocks
the top performers in the European equity market this year.
                                
 "The current inflation cycle is holding back markets and
it's the commodities that are the major problem," said Arthur
van Slooten, an equity strategist at Societe Generale in Paris.
However, SocGen did not see price pressures leading to
wage-price spiral, he added.
                                
 "If you're working on the assumption of slower growth in the
offing, as we do, the market really should run out of steam,
because the market is still too optimistic about earnings,
notably in the cyclical sectors," he said.
                                
 
                                
 BIG UBS LOAN
                                
 UBS said it made a huge loan to Blackrock <BLK.N> so the U.S
asset manager could buy $15 billion of distressed assets from
the Swiss bank, easing the strain on UBS's balance sheet, but
not freeing it from the risk.
                                
 In a deal similar to one used by U.S. bank Citigroup <C.N>
to offload subprime assets, UBS said it had provided 75 percent
of the funding used by Blackrock to buy the portfolio.
                                
 UBS shares were down 1.3 percent, in line with a broad-based
decline in banking shares.
                                
 The DJ Stoxx index of European banks <.SX7P> was last down
0.5 percent with shares in Societe Generale <SOGN.PA>, ING
<ING.AS> and Credit Suisse <CSGN.VX> down between 1 and 1.8
percent. 
                                
 Shares in HBSC <HSBA.A> were among the largest negative
weights on the index, off 0.6 percent as the stock traded
ex-dividend.
                                
 Within the financial sector, German insurer Allianz
<ALVG.DE>, Europe's largest, said it was in talks about the
future of its Dresdner Bank unit, but was not yet in a position
to report on them. Allianz shares were down 0.2 percent.
                                
 Around Europe, London's FTSE 100 <.FTSE> rose 0.9 percent,
after Tuesday's near 3 percent decline, while Frankfurt's DAX
<.GDAXI> and Paris' CAC 40 <.FCHI> both gained 0.2 percent.
                                
 Corporate Express <CXP.AS>, a Dutch office supplier fighting
off a hostile bid from U.S. rival Staples <SPLS.O>, has agreed
to buy French rival Lyreco for 1.39 billion euros ($2.16
billion) in cash and equity. Corporate Express shares were down
5.1 percent.
                                
Other stocks on the move included British building materials
group Wolseley <WOS.L>, which rose 2.2 percent to rank among the
biggest percentage gainers in Europe after delivering an in-line
first-half performance.
                                
 A gauge of German business sentiment beat expectations in
early May, showing investors were not as glum as previously
thought, or as suggested by another measure of investor
confidence released on Tuesday that fell to a more than two year
low.
                                
 The Ifo institute said its business climate index rose to
103.5 in May from 102.4 in April, against forecasts for a fall
to 102. Yet analysts said even an above-forecast reading would
not alter the outlook for the euro zone's largest economy.
                                
 "We think that even then there is no need to get
carried away, as the medium-term trend in sentiment still
points south," said analysts at UniCredit in a note.
                                
 "Moreover, major fundamentals point to a slowdown in the
quarters ahead. Companies' huge backlog orders will prevent an
abrupt slowdown in industrial activity. But the trend is clearly
no longer the German economy's friend."
                                
 After the European market close, the Federal Open Market
Committee releases the minutes from its April policy meeting but
this is not expected to reflect anything different from the
views expressed by U.S. policymakers recently on the central
bank's concern about both inflation and growth.
                                
 (editing by Elizabeth Fullerton)