Europe stocks tick up; drugs gain, commodities dip

                                
 By Sitaraman Shankar
                                
 LONDON, Aug 8 (Reuters) - European shares were led higher by
defensive healthcare stocks early on Friday as banks shrugged
off a big writedown at Royal Bank of Scotland <RBS.L>, but gains
were capped by weak commodities.
                                
 At 0841 GMT, the FTSEurofirst <.FTEU3> index of top European
shares was up 0.2 percent at 1,192.87 points in choppy trade,
with advancers outpacing decliners by 1.6 to 1.
                                
 Sanofi-Aventis <SASY.PA> rose 3 percent after its Multaq
heart drug was granted priority review by U.S. regulators. 
Novartis <NOVN.VX> gained 1.6 percent and GlaxoSmithKline
<GSK.L> rose 0.9 percent.
                                
 Banks were mixed after Royal Bank of Scotland kept the
sector's woes firmly in the spotlight, but its own results were
not as bad as expected.
                                
 Oil slipped more than $1.5 to $118.41 a barrel.
                                
 "There's certainly some improvement in the short term
picture, with falling oil and a rally in bonds providing a
stimulus," said Gerhard Schwarz, head of global equity strategy
at UniCredit in Munich.
                                
 "There's going to be more speculation of ECB rate cuts later
this year, and the fact that the market is more relaxed on
stagflation worries than before takes the pressure off
valuations to derate further," he said, but added that the
economic outlook was not comfortable, and the fall in freight
rates showed increased worry about emerging markets.
                                
 Across Europe, Britain's FTSE 100 <.FTSE> was flat, while
Germany's DAX <.GDAXI> and France's CAC <.FCHI> were up 0.4
percent.
                                
 Russian news agency Interfax reported that several Russian
peacekeepers were killed when Georgian artillery shelled their
base in Tskhinvali, the capital of Georgia's breakaway region of
South Ossetia.
                                
 "Russian markets are down, possibly due to Ossetia and oil
dropping further. We always have some sort of regional conflict
and as long as the supply of oil is maintained, the impact of
the conflict on western European markets should not be great,"
said UniCredit's Schwarz.
                                
 Russia's benchmark RTS stocks index <.IRTS> fell 2.3
percent.
                                
 
                                
 RBS RISES 
                                
 RBS fell to a first half loss of 691 million pounds, one of
the biggest losses in corporate history but better than
analysts' average expectations, after taking a 5.9 billion
writedown on the value of risky assets.
                                
 RBS fell initially but was trading 2 percent higher, UBS
<UBSN.VX> fell 2 percent, Barclays <BARC.L> fell 0.8 percent and
ING <ING.AS> slipped 0.9 percent.
                                
 "Some solace could be taken from the fact that these
writedowns may provide another contribution towards the end of
the credit fallout, but there remains much work to be done,"
said Richard Hunter, head of UK equities at Hargreaves Lansdown
Stockbrokers.
                                
 BG Group <BG.L> gained 2.3 percent after the group struck
oil in Brazil, while Swiss luxury goods group Richemont <CFR.VX>
gained 1.9 percent and British American Tobacco <BATS.L> fell 3
percent after Richemont said it was creating a new investment
vehicle to hold its near 20-percent stake in BAT.
                                
 Shareholders will be given 90 percent of its BAT stake,
Richemont said.
                                
 Commodity stocks were weaker, tracking lower metal and oil
prices. BP <BP.L>, Royal Dutch Shell <RDSa.L> and Total
<TOTF.PA> fell 0.6-1.5 percent, while Kazakhmys <KAZ.L> and
Antofagasta <ANTO.L> fell 3 percent.
  (Additional reporting by Michael Taylor; editing by Tony
Austin)