By Blaise Robinson
PARIS, April 2 (Reuters) - European stocks rose in early
trade on Wednesday, adding to the previous session's hefty gains
as optimism that the worst might be over in the global credit
crisis fuelled an extended rally in banking shares.
But the gains were limited by retreating auto stocks, on the
downside after data showed a 12 percent drop in overall U.S.
auto sales in March, hit by shaky consumer confidence, high fuel
prices and concern that a housing market downturn could spread
into a full recession.
Daimler <DAIGn.DE> was down 2.6 percent, Porsche <PSHG_p.DE>
down 2.5 percent and Volkswagen <VOWG.DE> down 0.4 percent.
GlaxoSmithKline <GSK.L> gained 1 percent, lifted by positive
news about the company's controversial diabetes drug Avandia,
while AstraZeneca <AZN.L> rose 1.6 percent on a brokerage
upgrade after an upbeat study on its Crestor drug.
At 0816 GMT, the FTSEurofirst 300 <> index of top
European shares was up 0.3 percent at 1,306.78 points, after
rising to a one-month high of 1,310.86 points. The index jumped
3.2 percent on Tuesday.
"This could go on for a while, because the market was very
oversold and the sentiment had become quite negative," said
Philippe Gijsels, senior equity strategist at Fortis Bank in
Brussels. "But at this time, there is nothing to suggest that
this is more than a bear market rally."
Barclays <BARC.L> was up 2.9 percent, Banco Santander
<SAN.MC> added 1 percent and Deutsche Bank <DBKGn.DE> was up 1.8
percent.
A $19 billion writedown by Swiss bank UBS <UBSN.VX> on
Tuesday raised hopes that banks were aggressively cleaning up
their books to get rid of investments linked to the turmoil in
the U.S. subprime mortgage market.
The market also got a boost from growing hopes that the G7
powers might act together to help shore up financial markets and
soothe the credit crisis.
In a report published by the Financial Times and confirmed
with other sources by Reuters, officials said a G7-backed forum
was discussing a wide range of crisis-combat options that
included recapitalisation of banks and repurchases of mortgages,
both with possible use of taxpayer's money.
The FTSEurofirst is still down 13 percent on the year,
dragged lower by worries over the prospect of a U.S. recession
and the impact of a global credit crisis on the banking sector.
"I think we have seen 'a' bottom, but I'm not sure we've
seen 'the' bottom yet," Gijsels said.
"I really see this as a bear market rally, that can last two
days or a couple of weeks, but which will eventually run out of
steam."
Around Europe, Germany's DAX index <> was up 0.3
percent, UK's FTSE 100 index <> up 0.1 percent and France's
CAC 40 <> up 0.2 percent.
Miners were mixed despite firmer base metal prices, with
Anglo American <AAL.L> down 1.4 percent, Antofagasta <ANTO.L>
down 0.8 percent and Xstrata <XTA.L> up 0.8 percent.
(editing by Elizabeth Fullerton)
