*FTSEurofirst 300 index close 0.8 percent higher
*Oils support as crude continues rally
*Banks cap gains as fears over losses linger
By Patrizia Kokot
LONDON, June 30 (Reuters) - European shares closed higher on
Monday, lifted by robust energy stocks, but ended the first half
of the year with a 20 percent decline as a surge in crude prices
underscored concerns over inflation, adding to worries about
bank losses.
The FTSEurofirst 300 <> index of top European shares
ended up 0.76 percent at 1,201.36 points, having shed 10 percent
in June compared to a 0.38 percent fall in the same month a year
earlier.
Oil prices hit a fresh record above $143 a barrel, boosting
heavyweight oil shares BP <BP.L>, Royal Dutch Shell <RDSa.L> and
Total <TOTF.PA> which gained between 2.4 and 3.2 percent.
"We expected to see some dips this month and expect markets
to remain volatile in the short term," senior equity strategist
Markus Wallner at Commerzbank in Frankfurt said, adding that the
biggest concern remained inflation.
"We cannot anticipate the further development of oil since
there are so many different factors at work -- demand and
supply, speculation, a weaker dollar, and another risk factor is
geopolitical," he added.
Among telecommunications groups, France Telecom <FTE.PA>
soared 7.2 percent after it walked away from its bid for
TeliaSonera <TLSN.ST> and indicated it may return cash to
shareholders. TeliaSonera slumped 10 percent.
In a note to clients, Dresdner Kleinwort raised its
recommendation on France Telekom to "neutral", cautioning that
"there is still a risk of FT doing a deal of some kind."
The speculation buoyed shares in KPN <KPN.AS>, up 2.3
percent.
British peer Vodafone <VOD.L> rallied 5.3 percent after
announcing a deal with News Corp's <NWSa.N> MySpace under which
footage from Vodafone-sponsored music events will be made
available to users of the social networking website.
Food producers were also major gainers on Monday, with
Cadbury adding 3.7 percent, fully recovering all of last week's
losses, while Swiss peer Nestle <NESN.VX> rose 3 percent after
its 1-for-10 share split to increase liquidity took effect.
Another traditional safe-haven, pharmaceuticals, were also
in demand with AstraZeneca <AZN.L> up 1.9 percent and Novartis
<NOVN.VX> 2.7 percent ahead, while Roche <ROG.VX> rallied 5.1
percent after it said its blockbuster cancer drug Avastin
produced good results in a trial.
Around Europe, the FTSE 100 index <> ended 1.7 percent
higher, the CAC-40 was up 0.9 percent and the DAX ended 0.06
percent lower.
The FTSEurofirst has now suffered four successive quarters
of losses, and its 20 percent decline in the first half compares
with an 8.2-percent gain in the first half of 2007.
FINANCIALS CONTINUE TO WEIGH
On the downside, banks remained the biggest losers by weight
with UBS <UBSN.VX> down 4.3 percent, having hit a 10-year low
amid fears of further losses and after sources with direct
knowledge of the matter told Reuters last week that the Swiss
bank might sell off the heart of its U.S. wealth management
business.
"Two years ago, it was almost unthinkable that they would
sell it," said Peter Thorne, an analyst at Helvea.
"It is not exactly the family silver but almost. In my mind,
it has been slated for disposal ever since the crisis broker,"
he added.
"The situation at UBS confirms that the we haven't overcome
the crisis yet," Commerzbank's Wallner said, adding that "the
writedowns may soon be over but some business segments are
severely hurt."
Other banks were also hit, with Deutsche Bank <DBKGn.DE>
down 1.2 percent and Lloyds TSB <LOY.L> down 1.97 percent.
Natixis <CNAT.PA> shed 5 percent after it said it raised its
stake in Spanish utility Iberdrola <IBE.MC> to 5.5 percent from
3.78 percent.
(Additional reporting by John O'Donnell; Editing by David
Cowell)
