* FTSEurofirst 300 up 0.6 pct ahead of Fed decision
* Banks lead advance as Barclays rises after share issue
* Mining shares retreat despite steady metal prices
By Blaise Robinson
PARIS, June 25 (Reuters) - European stocks rose on
Wednesday, bouncing back from recent sharp losses, led by banks,
which got a boost from merger activity and a share issue by
Barclays <BARC.L>.
But gains were limited by a fall in mining shares, which
retreated despite steady metal prices. Rio Tinto <RIO.L> shed
1.9 percent, BHP Billiton <BLT.L> dropped 2.1 percent and
Xstrata <XTA.L> fell 2.6 percent. The DJ Stoxx basic resources
index <.SXPP> is still up about 6 percent on the year, Europe's
best performing sector in 2008.
Investors' focus was also on the U.S. Federal Reserve's rate
decision and policy statement, expected later on Wednesday, that
could shed light on the outlook for rates.
At 0828 GMT, the FTSEurofirst 300 <> index of top
European shares was up 0.7 percent at 1,222.27 points.
The index ended at its lowest close since mid-March on
Tuesday, hit by renewed worries over the outlook for the U.S.
economy after weak U.S. consumer confidence data and a profit
warning by UPS <UPS.N>.
The Fed, which has slashed interest rates by 2.25 percentage
points so far this year, is expected to keep rates at 2 percent.
But the focus will be on the Fed's policy statement, as
investors look for insight on the outlook for rates.
"The spotlight will definitely be on the Fed's statement.
With the U.S. economic situation --just look at yesterday's
dismal consumer confidence data-- I don't see how they could
signal a tightening bias," said Valerie Plagnol, chief
strategist at CM-CIC Securities, in Paris.
"It'll be interesting to see how they talk about inflation.
They might say that they are increasingly focusing on broad
inflation instead of just core inflation."
INSIGHT ON RATES
Before the Fed's decision and statement, due at 1815 GMT,
investors will have to digest a flurry of macroeconomic
indicators, including durable goods orders for May, due at 1230
GMT, and new home sales for May, due at 1400 GMT.
"With the Fed waiting out the inflation "scare", we now
expect the next cut will not occur until January. This shift
means we likely will see fewer cuts. We now look for a terminal
Fed funds rate of 1.50 percent - rate cuts of 25bp in both
January and March - rather than our previous terminal rate of
1.00 percent," Merrill Lynch analysts wrote in a note.
Barclays shares rose by as much as 6.4 percent at one point
after unveiling an $8.8 billion share issue. Barclays was last
up 5.6 percent, while shares in Deutsche Postbank <DPBGn.DE>
rose 4.1 percent after sources said a number of European banks,
including ING <ING.AS>, Santander <SAN.MC>, Deutsche Bank
<DBKGn.DE> and Lloyds TSB <LLOY.L>, were interested in buying
Germany's largest retail bank.
Deutsche Post, ING and Santander declined to comment.
Energy stocks also rose, with Total <TOTF.PA> up 0.9
percent, BP <BP.L> up 2.1 percent and Repsol <REP.MC> up 0.7
percent, as U.S. crude oil futures hovered around $137 a barrel,
ahead of U.S. weekly inventory data, due at 1435 GMT.
Around Europe, Germany's DAX index <> gained 0.6
percent, Britain's FTSE 100 index <> rose 0.5 percent and
France's CAC 40 <> added 1.1 percent. The DAX is down 19
percent so far in 2008, the FTSE 100 down 12 percent and the CAC
40 down 20 percent.
(Editing by Sue Thomas)
