* FTSEurofirst 300 up 0.4 percent
* Banks top gainers
* Index on track for third straight month of gains
* Cyclicals outpace defensives this year
* For up-to-the-minute market news, click on []
By Sitaraman Shankar
LONDON, May 27 (Reuters) - European shares rose in early
trade on Wednesday, led by banks and tracking gains in overnight
markets after U.S. consumer confidence data fuelled hopes of an
economic recovery.
At 0808 GMT the FTSEurofirst 300 <> index of top
European shares was up 0.4 percent at 868.50 points. The index
has risen 5 percent in May and is set for its third straight
month of gains, its best winning streak in two years.
Banks were broadly higher, with UBS <UBSN.VX>, Royal Bank of
Scotland <RBS.L>. Credit Agricole <CAGR.PA>, Societe Generale
<SOGN.PA>, Lloyds <LLOY.L> and HSBC <HSBA.L> adding 1.4 to 3.3
percent.
Analysts said equities gains were fuelled by central banks
pumping liquidity into the system, and were set to continue.
"Liquidity rallies can last quite a while, perhaps more than
a year -- we see European shares gaining 10 percent (overall)
this year," said Franz Wenzel, strategist at AXA Investment
Managers in Paris.
"Excess liquidity is more in favour of riskier asset classes
like equities -- asset classes benefit first before it can lead
to inflation," he said.
Among top losers on the FTSEurofirst 300 was Britain's
Tullow Oil <TLW.L>, which fell 1.5 percent after saying it had
plugged and abandoned a well in Uganda.
Across Europe, Britain's FTSE 100 <> was up 0.4
percent, Germany's DAX <> was up 0.5 percent and France's
CAC <> was up 0.5 percent. Wall Street futures <SPc1>
<DJc1> <NDc1> were around 0.2 percent higher.
DEFENSIVES OUT OF FAVOUR
The FTSEurofirst 300 has risen nearly 35 percent since March
9, when it hit the lowest point in its 12-year lifetime, and is
up 4.4 percent so far this year.
The surge has been driven by improving macroeconomic data,
better than expected results from some top companies and a
stabilisation in banks.
It has also lifted cyclical stocks well above defensives.
Cyclicals rise when hopes of economic recovery gain ground,
while investors seek defensives in times of strife.
In the year to date the DJ Stoxx European basic resources
sector index <.SXPP> has surged nearly 40 percent, while the
banks index <.SX7P> has risen 22 percent.
On the other hand the DJ Stoxx European food and beverage
index <.SX3P>, a defensive sector, has gained just 2.3 percent,
while healthcare stocks <.SXDP>, utilities <.SX6P> and telecoms
<.SXKP> are the three worst performing sectors, down 6.1 to 8.4
percent.
On Wednesday, drug stocks slipped again, with Novartis
<NOVN.VX>, Sanofi-Aventis <SASY.PA> and GlaxoSmithKline ,GSK.L>
down 0.4-0.7 percent.
Macroeconomic data continued to be broadly positive. After
U.S. consumer confidence surprised investors on Tuesday, hitting
its highest level in eight, Japanese exports showed modest signs
of recovery, figures for April showed on Wednesday.
"It's a sensible conclusion that we have avoided a
depression, and while we're admittedly in a deep recession the
terrain we are walking on has stabilised and the macroeconomic
data are producing rays of hope for the second half," said AXA's
Wenzel.
(Editing by Greg Mahlich)
