* FTSEurofirst 300 ends 0.53 percent higher
* Drops in oil and euro buoy airline and automotive stocks
* Banks turn around after Wells Fargo results
By Patrizia Kokot
LONDON, July 16 (Reuters) - European shares ended higher on
Wednesday as falling oil prices supported the broader market, a
weaker euro underpinned automotive stocks and solid results from
Wells Fargo <WFC.N> lifted battered banks.
The FTSEurofirst 300 <> index of top European shares
closed 0.5 percent higher at 1,115.97 points, having fallen as
much as 1.6 percent earlier in the session.
A $5 drop in crude <CLc1> on the back of a surprise increase
in U.S. inventories lifted airline stocks, with Air France-KLM
<AIRF.PA> rallying 7.8 percent, Lufthansa <LHAG.DE> up 4.8
percent and British Airways <BAY.L> up 6.9 percent.
Automotive stocks soared as the U.S. dollar strengthened
against the euro <EUR=> after Federal Reserve Chairman Ben
Bernanke told a U.S. House of Representatives panel that
currency intervention may be warranted under certain conditions.
BMW <BMWG.DE> was up 2 percent, Renault <RENA.PA> rose 7.4
percent and Peugeot <PEUP.PA> added 4.6 percent.
BANKS STAGE SHARP TURNAROUND
Banks, the heaviest drag on the European market earlier in
the day, ended higher after Wells Fargo reported unexpectedly
strong quarterly results.
The DJStoxx European banks index <.SX7P> rose 1.6 percent,
with Barclays <BARC.L> adding 2.4 percent and Fortis <FOR.BR>
<FOR.AS> gaining 4.6 percent, and UBS <UBSN.VX> rising 3.4
percent.
Alpha Trading asset manager Stefan de Schutter doubted the
longevity of the turnaround witnessed in late trade.
"We were oversold earlier and this is a technical rally. The
comments from Bernanke were a big push but in the end nothing
has really changed," he said.
Andreas Huerkamp, a strategist at Commerzbank in Frankfurt,
said there are some signs that the current downtrend is coming
to the end.
"Depressed investor sentiment was, contrary to our
expectations, not able to stop the current correction of equity
markets," he said, adding that a VDAX <.V1XI> of 26, as well as
a put-call ratio of 1.10 are historic signals that the downward
trend is losing momentum.
The VDAX-NEW volatility index, based on sell and buy options
on Frankfurt's top 30 stocks, was down 3.7 percent at 26.76.
Huerkamp said that company earnings had shown a surprising
resilience throughout the credit crunch, noting that "our
economic-earnings-valuation-sentiment-model still indicates that
the current dip should be the last dip in the current crisis".
Among companies reporting on Wednesday, Alstom <ALSO.PA>
jumped 8.5 percent after the French high-speed train and
industrial power plant group posted solid first-quarter sales.
OIL STOCKS HIT FTSE
Britain's commodity-heavy FTSE 100 <> ended down 0.4
percent, while Germany's DAX <> added 1.2 percent and
France's CAC <> rose 1.3 percent.
Heavyweight oil groups BP <BP.L>, Total <TOTF.PA> and Shell
<RDSa.L> shed between 2.8 and 3.2 percent.
Germany's Deutsche Postbank <DPBGn.DE> slumped 7.3 percent
amid fears that a three-way merger with Commerzbank <CBKG.DE>
and Allianz <ALVG.DE> could fail and leave the retail bank
stranded without a buyer or partner in its quest to expand its
operations.
Other notable decliners included Norwegian fertiliser group
Yara <YAR.OL>, down 7.2 percent amid worries over its outlook
and concerns that consensus estimates may be too high, traders
said.
(Editing by Paul Bolding)
