By Blaise Robinson
PARIS, June 3 (Reuters) - European stocks ended higher on
Tuesday, trimming some of the previous session's losses as Royal
Bank of Scotland <RBS.L> and UBS <UBS.VX> recovered, while a
fall in oil prices helped bolster sentiment.
Infineon <IFXGn.DE> jumped 7.4 percent after the German
chipmaker's new CEO pleased investors with his strategy unveiled
on Tuesday.
Stocks also got a boost in late trading after data showed
new orders at U.S. factories rose by a stronger-than-expected
1.1 percent in April, easing concerns over the health of the
U.S. economy.
"People are realising that the U.S. economy is not tipping
into recession after all," said Francois Chevallier, strategist
at VP Finance in Paris.
"The data confirms that companies are in a relatively good
shape, unlike household and consumer spending. Companies are
benefiting from rising demand in emerging economies that offset
sluggish demand at home," he said.
The FTSEurofirst 300 <> index of top European shares
closed 0.75 percent higher at 1,329.07 points. The benchmark
index, which slid 1.1 percent on Monday, is down 12 percent so
far this year.
Oil dropped by nearly 2 percent to $125.40 a barrel as the
U.S. dollar rose after the Federal Reserve issued a warning on
the inflationary risk posed by a weak dollar.
The drop in oil prices eased recent inflation fears and
concerns over the impact of high energy costs on corporate
profits.
Royal Bank of Scotland <RBS.L> soared 8.3 percent, propelled
by market talk that activist investor TCI may be building a
stake and as the end of a rights issue trading period nears,
according to dealers. RBS declined to comment.
UBS <UBSN.VX> gained 3.8 percent, bouncing back from recent
sharp losses, helped by comments from rating agency Standard &
Poor's.
"We expect UBS to return to profitability in the remainder
of 2008, notwithstanding the potential for further writedowns,
credit valuation adjustments, and other charges relating to its
U.S. residential mortgage-related exposures," S&P analyst
Richard Barnes said in a statement.
BANKS STILL UNDER PRESSURE
Banking stocks have been knocked lower over the past year by
worries on the impact from the slumping U.S. housing market and
the meltdown in the risky subprime mortgage market.
Despite the rally by shares of RBS and UBS, other banks
suffered fresh losses on Tuesday.
"Banks have been hammered much more than the broad market
and are trading at 8 times expected earnings at the moment,
compared with 11 times before the crisis," Chevallier said.
"Investors are concerned that the European housing market
bubble could burst. House prices have come down in the U.S., but
they are just starting to fall in Europe."
Both Irish banks Bank of Ireland <BKIR.I> and Anglo Irish
Bank <ANGL.I> sank around 8 percent, falling sharply as they
reacted to this week's fresh credit fears after the Irish market
was closed on Monday for a public holiday.
Elsewhere in Europe, BNP Paribas <BNPP.PA> shed 1 percent,
Credit Suisse <CSGN.VX> fell 1.3 percent and Barclays <BARC.L>
dropped 1.4 percent.
"We thought there was a glimmer of light on the horizon.
They'd drawn a line under the problems, identified the holes and
knew what amount of gravel they needed to fill the holes,"
Justin Urquhart Stewart, a director at Seven Investment
Management, said of the banking sector.
"What we did not anticipate is the hole getting bigger, and
the cost of gravel has gone up."
Around Europe, Germany's DAX index <> gained 0.2
percent, UK's FTSE 100 index <> rose 0.8 percent and
France's CAC 40 <> added 1 percent.
Dutch office goods supplier Corporate Express <CXP.AS>
gained 6.8 percent after U.S. rival Staples <SPLS.O> sweetened
its all-cash bid for the company to 1.7 billion euros ($2.65
billion).
Luxury group Hermes <HRMS.PA> tumbled 7.6 percent, trimming
recent hefty gains as market speculation of stake-building in
the group faded away after Bertrand Puech, executive chairman
and representative of the controlling family, said at the annual
general assembly that the family remained attached to keeping
its stake.
(Additional reporting by Rebekah Curtis in London; Editing by
David Cowell)
