* FTSEurofirst 300 bounces back, up 0.5 percent
* Energy, mining shares rally along with commodities
* Tech shares up after HP earns, STMicro-Ericsson deal
By Blaise Robinson
PARIS, Aug 20 (Reuters) - European shares rose in early
trade on Wednesday, recouping some of the losses from the
previous session as commodity-related stocks bounced back along
with oil and metal prices.
At 0810 GMT, the FTSEurofirst 300 <> index of top
European shares was up 0.5 percent at 1,164.97 points.
Rio Tinto <RIO.L> added 5.1 percent, Xstrata <XTA.L> gained
3.8 percent and BP <BP.L> rose 1.5 percent.
Oil prices edged up to above $115 a barrel while copper and
aluminium prices rose, as a lower U.S. dollar rekindled buying
in commodities.
Tech shares got a boost from Hewlett-Packard <HPQ.N> results
that beat estimates overnight and from a deal announced by
STMicroelectronics <STM.PA> and Ericsson <ERICb.ST> to combine
their chip and mobile applications businesses.
STMicro gained 1.7 percent, Ericsson rose 0.5 percent, while
Infineon <IFXGn.DE> added 1.4 percent and Alcatel-Lucent
<ALUA.PA> gained 0.5 percent.
"(The news in the tech sector) helps a bit, but it doesn't
change the general mood. We've seen four or five weeks of
rebound, but that recovery mood has been destroyed over the last
few days by negative news flow from the banking sector," said
Achim Matzke, European stock indexes analyst at Commerbank in
Frankfurt.
"The sharp drop in commodity prices since mid-July seems to
have been priced in now. In the best case, the market is moving
sideways, with a negative touch."
The FTSEurofirst 300 sank 2.5 percent on Tuesday, ending at
its lowest closing level in two weeks, hit by renewed credit and
inflation jitters.
The benchmark index has lost 23 percent so far this year,
hit by recession fears, as well as worries over inflation and
the impact of the credit crisis on banks' balance sheets.
Shares in Wall Street firm Lehman Brothers <LEH.N> tumbled
13 percent on Wall Street overnight after JPMorgan Securities
forecast that the investment bank will take a further $4 billion
in writedowns tied to losses on mortgage-related investments.
Goldman Sachs slashed its earnings outlooks for five major
rivals, citing mounting writedowns on mortgages, a slowdown in
overall activity and legal expenses.
European banks were mixed on Wednesday after suffering sharp
losses in the previous session. The DJ Stoxx bank index <.SX7P>
is down 33 percent year-to-date.
Barclays <BARC.L> was down 2.5 percent, while UBS <UBSN.VX>
was up 2.4 percent.
"The banking system needs to continue rationalisation, and
we will see some mergers under pressure as there's not enough
business around for the banks," said Justin Urquhart Stewart,
investment director at Seven Investment management.
Around Europe, Germany's DAX index <> was up 0.5
percent, UK's FTSE 100 index <> up 0.8 percent and France's
CAC 40 <> up 0.6 percent.
So far this year, the DAX is down 22 percent, the FTSE 100
is down 17 percent and the CAC is down 22 percent.
Wednesday's rally in Europe followed gains in most Asian
bourses. China's main stock index soared more than 7 percent on
hopes the government would introduce a stimulus package to boost
the slowing economy and aid the stock and property markets.
In London, Sainsbury <SBRY.L> fell 2.3 percent after
JPMorgan downgraded the British supermarket group to "neutral"
from "overweight" and said it prefers rival Morrison <MRW.L>.
Spain's Ferrovial <FER.MC> rose 2.8 percent after the UK
Competition Commission said its BAA unit may have to sell two of
its three London airports.
(Editing by Sue Thomas)
