European shares rise; set for worst annual drop

                                
 * FTSEurofirst 300 rises 0.7 percent
                                
 * Volume thin in shortened session
                                
 * Market on course for record annual drop of 44.9 pct
                                
 
                                
 By Brian Gorman
                                
 LONDON, Dec 31 (Reuters) - European shares rose in early trade on Wednesday, boosted by a
rally on Wall Street overnight, but with volumes thin in a shortened session on the last day
of 2008, a miserable year for the markets.
At 0939 GMT, the FTSEurofirst 300 <.FTEU3> index of top European shares was up 0.7 percent
at 830.05 points.
                                
 But the index has lost nearly 45 percent this year, the worst performance in its history,
hit by a credit crisis that has helped to push several major economies into recession.
                                
 Banks, which have had a disastrous 2008, with many requiring government bail-outs, rose.
BNP Paribas <BNPP.PA>, Barclays <BARC.L>, HSBC <HSBA.L> and Royal Bank of Scotland <RBS.L>
were up between 0.5 and 1.6 percent.
                                
 "If there's any optimism, it's on the basis that stock markets recover in recessions,"
said Justin Urquhart Stewart, director at Seven Investment Management.
                                
 "Last year we were so optimistic, that we were fooling ourselves. It's now gone too far
the other way. We've discounted a huge amount of bad news."
 
                                
 OILS GAIN
                                
 Oil shares gained, despite crude futures <CLc1> extending losses from Tuesday and trading
down more than 2 percent, at just over $38 a barrel.
 Total <TOTF.PA>, BP <BP.L> and Royal Dutch Shell <RDSa.L> were up between 0.9 and 1.3
percent.
 Vodafone <VOD.L> was up 1.5 percent after Credit Suisse set a "trading buy" recommendation
on the stock. It feels sterling's weakness has left earnings guidance and consensus beatable
for the mobile telecoms group. 
                                
 However, the pound's weakness against the euro has also seen Vodafone overtaken by
Telefonica <TEF.MC> as Europe's biggest telecoms company by market value. 
                                
 Pharmaceuticals gained. GlaxoSmithKline <GSK.L> rose 1.8 percent. AstraZeneca <AZN.L> rose
2.2 percent, taking its gain for the year to more than 30 percent, making it one of the best
performers in the index this year.
                                
 All but four of the 38 sectors in the FTSEurofirst 300 index were higher.
                                
 Across Europe, Britain's FTSE 100 <.FTSE> and France's CAC-40 <.FCHI> both rose 0.9
percent.
                                
 The London Stock Exchange will close at 1230 GMT on Wednesday, and Euronext's Paris,
Amsterdam and Brussels bourses will close at 1300 GMT, while a number of markets such as
Germany, Austria, Denmark, Finland, Norway, Sweden, Italy, Spain and Switzerland remain
closed.
                                
 Japanese markets were also closed on Wednesday.
                                
 U.S. stocks climbed on Tuesday after the government expanded its bailout of the auto
industry. The Dow Jones industrial average <.DJI> rose 2.2 percent; the Standard & Poor's 500
Index <.SPX> gained 2.4 percent.
                                
 However, futures for the Dow Jones <DJc1>, S&P 500 <SPc1> and Nasdaq <NDc1> were down
between 0.1 and 0.3 percent, ahead of a full day's trading.
 (Editing by Hans Peters)