* FTSEurofirst 300 up 1.6 pct, adding to Wednesday's gains
* Banks surge after Wells Fargo's results reassured
* Investors focus on results from JPMorgan, Merrill
By Blaise Robinson
PARIS, July 17 (Reuters) - European stocks gained ground in
early trade on Thursday, extending the previous session's
tentative recovery as banks surged after results from Wells
Fargo <WFC.N> sparked a relief rally on Wall Street.
Shares in airlines recovered after oil prices fell following
a surprise build in U.S. crude oil inventories. Lufthansa
<LHAG.DE> was up 2.6 percent, Air France-KLM <AIRF.PA> up 3.9
percent and British Airways <BAY.L> up 3.2 percent.
At 0806 GMT, the FTSEurofirst 300 <> index of top
European shares was up 1.6 percent at 1,134.07 points.
Recently beaten-down European banking stocks were the
biggest gainers, with UBS <UBSN.VX> soaring 5.5 percent, Royal
Bank of Scotland <RBS.L> surging 7 percent and Fortis <FOR.AS>
adding 4 percent.
"Even if we get a positive surprise here and there, that
doesn't mean the financial crisis is over. We might get a
technical rebound on the short term, but from a macro
perspective, it's a different story," said Yann Lepape, chief
global macro strategist at Oddo Securities in Paris.
U.S. banking stocks had their best session in 16 years on
Wednesday after unexpectedly strong results from Wells Fargo,
the fifth-largest U.S. bank and a big mortgage lender, eased
fears over the impact of the credit crisis on banks' balance
sheets.
The DJ Stoxx European banking index <.SX7P> soared 3.5
percent on Thursday, but remains the biggest loser among
Europe's sectors, down 37 percent so far this year.
Earlier this week, a rescue plan for top U.S. mortgage
finance companies Fannie Mae <FNM.N> and Freddie Mac <FRE.N>
gave investors temporary relief, before concerns about the fate
of other financial institutions knocked equities markets lower
again.
Investors will keep a close eye on quarterly results
expected later in the day from JPMorgan Chase <JPM.N> and
Merrill Lynch <MER.N> for more insight on the credit crisis, as
well as results from heavyweights such as Nokia <NOK1V.HE>, IBM
<IBM.N>, Microsoft <MSFT.O> and Google <GOOG.O>.
"Apart from the financials, corporate results for the second
quarter might not be as bad as expected, but overall we see a
further deterioration of the economic conditions, and corporate
results could really suffer in the third quarter. Consensus
estimates are still too high," Lepape said.
Germany's DAX index <> was up 1 percent, UK's FTSE 100
index <> up 1.6 percent and France's CAC 40 <> up 1.5
percent.
Novartis <NOVN.VX> gained 2 percent after posting a
forecast-beating 17 percent rise in quarterly net profit.
Utility Union Fenosa <UNF.MC> and construction firm ACS
<ACS.MC> climbed 7.5 percent and 6.6 percent respectively after
ACS confirmed it is considering the sale of its 45.3 percent
stake in Union Fenosa to consolidate its 12.5 percent stake in
Iberdrola <IBE.MC>.
France's Essilor International <ESSI.PA>, the world leader
in ophthalmic optics, tumbled 10 percent after posting
first-half sales that disappointed investors.
(Editing by Paul Bolding)
