* FTSEurofirst 300 <> index up 0.3 pct
* Banks at three-month high after Basel, stress tests
* For up-to-the-minute market news, click on []
By Brian Gorman
LONDON, July 28 (Reuters) - European shares rose on
Wednesday, extending a rally into a seventh session, as several
companies reported forecast-beating earnings, and banks gained
further on optimism for the sector.
At 0834 GMT, the FTSEurofirst 300 <> index of top
European shares was up 0.3 percent at 1,056.77 points, having
risen 0.5 percent in the previous session to its highest close
since June 21.
The index is just 5.2 percent off its April peak, as worries
about the euro zone's sovereign debt crisis have receded.
Banks were among the major gainers, with the STOXX Europe
600 banking index <.SX7P> at its highest in three months.
Banks were extending gains from Tuesday, when they were
boosted by strong earnings from UBS <UBSN.VX>, and the new Basel
III capital rules proving less stringent than feared. They had
also gained on Monday after the vast majority of banks passed
stress tests.
Those on the rise included BNP Paribas <BNPP.PA>, Barclays
<BARC.L>, Credit Agricole <CAGR.PA> and Societe Generale
<SOGN.PA>, up between 1.1 and 2.1 percent.
Deutsche Bank said in a note that it was moving its stance
on the banking sector to "neutral" from "underweight".
But Spain's second-largest bank, BBVA <BBVA.MC>, reversed
earlier gains, to trade 0.6 percent lower, though it beat
analyst forecasts, after bad loans fell and overseas gains
partially offset a sluggish domestic business.
"Earnings are coming through better than expected," said
Bernard McAlinden, investment strategist at NCB Stockbrokers in
Dublin. "Banks are better, with Basel, and the stress tests,
having underperformed for some time.
"There's an abatement of worries about the euro zone
peripheral economies. Some of the macroeconomic data is pointing
to a slowdown, but investors are making up their mind there
won't be a double dip."
Miners gained as copper prices hit their highest levels
since mid-May in both Shanghai and London on assurance from
China about the economic growth outlook. Other metals also
gained.
Anglo American <AAL.L>, Rio Tinto <RIO.L> and Xstrata
<XTA.L> rose between 1.5 and 2.5 percent.
Across Europe, Britain's FTSE 100 <> and Germany's DAX
<> were up 0.1 percent; France's CAC40 <> rose 0.4
percent.
The euro zone blue chip index <> rose 0.3 percent
to 2,776.73, edging nearer to 2805.9, a key 38.2 percent
retracement level between its April high and its May low.
SAFRAN RISES
Among other individual movers, Safran <SAF.PA> rose 8.1
percent after the French aerospace company raised its operating
margin forecast for the year following stronger-than-expected
first-half earnings. []
ArcelorMittal <ISPA.AS>, the world's largest steelmaker,
fell 2 percent after forecasting a sharp fall in earnings in the
third quarter due a slowdown in China, the normal summer lull
and higher raw material costs.
French carmaker PSA Peugeot Citroen <PEUP.PA> fell 3.5
percent even after first-half sales surged and it swung back to
profit.
Telefonica <TEF.MC> edged up 0.2 percent after confirming it
would buy Portugal Telecom's <PTC.LS> stake in Vivo <VIVO4.SA>.
(Editing by Sharon Lindores)
