* FTSEurofirst 300 up 0.6 pct, recovering from recent losses
* AstraZeneca surges after winning court battle over drug
* M&S weighs on UK retailers after shock profit warning
By Blaise Robinson
PARIS, July 2 (Reuters) - European stocks rose in early
trade on Wednesday, trimming recent sharp losses led by pharma
stocks after AstraZeneca <AZN.L> won a key U.S. patent battle,
while an upbeat broker note boosted telecoms shares.
Banks were the top performing sector on the broader market
as investors snapped up financials after four days of declines
<.SX7P>.
HBSC <HSBA.L>, UBS <UBSN.VX> and Credit Agricole <CAGR.PA>
rose between 1.1 and 3 percent, while Deutsche Bank <DBKGn.DE>
gained nearly 5 percent after saying it expects a profit in the
second quarter and does not require further capital.
AstraZeneca gained 6.2 percent after the group won a key
U.S. patent battle over its second-biggest selling drug
Seroquel, for schizophrenia and bipolar disorder. The news
lifted the sector, with GlaxoSmithKline <GSK.L> up 2.8 percent
and Novartis <NOVN.VX> up 1.8 percent.
But the market's tentative recovery was limited by lingering
inflation worries fanned by high oil prices and as the euro
<EUR=> hit a two-month high against the dollar ahead of a widely
expected interest rate rise from the European Central Bank.
At 0829 GMT, the FTSEurofirst 300 <> index of top
European shares was up 0.6 percent at 1,182.21 points. The index
lost 2.2 percent in the previous session, ending at its lowest
close since October 2005.
Oil rose more than $1 a barrel on Wednesday, within sight
of Monday's record high above $143 on forecasts that global
supply will lag demand and as the U.S. dollar retreated against
the euro on expectations the European Central Bank will raise
interest rates later this week.
"We see oil prices peaking in the third quarter of this
year, so up to that point the heat will be on," said Arthur van
Slooten, strategist at Societe Generale, in Paris.
"An upward correction is always possible for equities, but
any real correction implies lower oil prices."
RETAILERS, HOMEBUILDERS DENT FTSE
Around Europe, Germany's DAX index <> was up 0.6
percent and France's CAC 40 <> up 0.6 percent. Britain's
FTSE 100 index <> was up 0.4 percent, underperforming
slightly as homebuilders and retailers took a pounding.
UK housebuilder Taylor Wimpey <TW.L> plunged 47 percent
after saying it had failed to raise the additional capital it
sought due to current market conditions, hitting the sector.
The euro hit a 2-month high against the greenback on
Wednesday, as markets anticipated a rate hike by the European
Central Bank to 4.25 percent on Thursday.
A stronger euro makes it more expensive for European firms
to export and it reduces the companies' U.S. sales when
translated back into euros.
"The ECB would take a huge risk with the growth outlook if
they raise rates now. But if they do hike rates, it will really
be to crush any expectations of continuing inflation beyond what
is caused by current oil prices," van Slooten said.
Among the retailers, Marks and Spencer <MKS.L> sank over 20
percent to a 7-year low, dragging down other UK retailers, after
the clothes, food and homewares retailer issued a shock profit
warning and said others are likely to follow suit in a deepening
consumer downturn.
Next <NXT.L> lost 7.3 percent, Kingfisher <KGF.L> dropped
3.1 percent and J Sainsbury <SBRY.L> fell 6 percent.
Food and beverage stocks were among the biggest losers, with
France's Danone <DANO.PA> down 5.5 percent after Morgan Stanley
cut its rating on the stock to "equal weight" from "overweight"
and Cheuvreux cut its rating to "underperform".
(Editing by Sue Thomas)
