By Amanda Cooper
LONDON, April 18 (Reuters) - European shares rose on Friday,
driven by financials, where speculation of a rights issue by
Royal Bank of Scotland <RBS.L> sparked optimism that banks were
close to revealing the extent of their exposure to the financial
crisis.
RBS shares reversed early gains to fall by nearly 2 percent
but analysts interpreted a possible capital raising as a
positive sign for the sector, which has been racked by concern
about losses linked to the U.S. housing market.
Shares in TeliaSonera <TLSN.ST> were among the top gainers
in early trade after France Telecom <FTE.PA> said it was in
exploratory talks with the Nordic operator, but had not started
negotiations. France Telecom was off 1.8 percent.
The FTSEurofirst 300 index <> of top European shares
was up 0.6 percent at 1,302.93 points by 0812 GMT. Advancing
issues outnumbered decliners by about four to one, compared with
seven to one in early trade.
Banks accounted for about 20 percent of the net increase in
the FTSEurofirst.
"It (the banking crisis) only ends once you start seeing
stability in property prices and therefore the assets that
you're borrowing against then have some strength," said Justin
Urquhart Stewart, investment director at 7 Investment
Management.
"Banks are taking action to shore up their capital position
and that means they must have a better idea of precisely what
exposure they have," he said, adding: "They can only come to the
market once, you can't keep coming back and doing it."
RBS holds its annual general meeting on Wednesday next week.
According to Reuters data, RBS' capital position is the weakest
of all the British banks by Tier1 capital ratio and ranks in the
bottom third among European banks.
Societe Generale <SOGN.PA>, BNP Paribas <BNPP.PA> and
UniCredit <CRDI.MI> all gained between 1.7 and 1.9 percent.
Coming up later in the day are results from Citigroup <C.N>,
the largest U.S. bank. JPMorgan Chase <JPM.N> and Merrill Lynch
<MER.N> reported earlier this week, and while they unveiled
further writedowns, results were not as grim as some investors
had feared and shares in both companies are up between 6 and 7
percent this week.
The FTSEurofirst 300 is down about 13 percent this year, in
large part because of the declines in financial shares as
investors have grown increasingly worried about multibillion
dollar losses stemming from the credit crunch.
But a degree of relief over the outlook for earnings after
some of the major U.S. financials this week, along with tech
stocks such as IBM <IBM.N> and Google <GOOG.O>, has helped boost
morale in Europe and the FTSEurofirst is on track for a 3.5
percent gain this month, its best in a year.
Rio Tinto shares <RIO.L> was one of the largest drags on the
broader market, falling 0.4 percent on market speculation BHP
Billiton <BLT.L> will not raise its bid for the company, traders
said. BHP shares were down 0.6 percent.
BHP and Rio were the only two mining companies in the red.
Antofagasta <ANTO.L> and Anglo American <AAL.L> rose between 1.2
and 1.3 percent.
In other merger news, Britain's Punch Taverns <PUB.L> said
it had ended talks with pub-owning rival Mitchells & Butler
<MAB.L>, confirming press speculation, because a deal would not
be in shareholders' interests.
Punch shares were down 1.9 percent, while M&B shares were
down by the same amount.
