* Top-300 index up 0.2 pct, erasing some of Monday's losses
* U.S. consumer cheer outweighs German business gloom
* Nokia jumps 2.9 percent after unveiling new mobile phones
By Peter Starck
FRANKFURT, Aug 26 (Reuters) - European shares rose on
Tuesday, erasing some of the previous session's losses, led by
mobile phone maker Nokia <NOK1V.HE> and with the broader market
helped by a surprise improvement in U.S. consumer confidence.
The U.S. data sparked hopes that the worst might be over for
the world's largest economy and outweighed a
steeper-than-expected drop in German business confidence, which
had sent the market lower during morning trade.
But traders and analysts said investors appeared risk-averse
and saw no signs yet of a sustained stock market recovery.
"The markets will trade in a nervous zig-zag for the next
few weeks," said Heinz-Gerd Sonnenschein, equity strategist at
Postbank in Germany, citing uncertain prospects for economic
growth and hence for commodities and currencies, as well as
persistent financial industry worries.
The FTSEurofirst 300 <> index of top European shares
rose 0.2 percent to 1,171.09 points. It lost 0.6 percent on
Monday, when the UK stock market was closed for a holiday.
The index fell as much as 1.4 percent early on Tuesday after
the closely watched Ifo business climate indicator for Germany,
Europe's largest economy and the world's top exporter, came in
below the market's consensus.
"The German economy will face a sudden and sharp downturn in
the second half of this year leading to a fully-fledged
recession," brokerage Steubing said in a note on the Ifo data.
"Corporate earnings are going to fall this and next year,"
Steubing said, adding: "We are underweight equities as we are
convinced that next year's contraction isn't priced in."
Citigroup said the Ifo numbers suggested "a further fall in
euro area industrial confidence."
Sonnenschein at Postbank attributed the partial recovery in
European stocks, which set in before the U.S. data lifted the
markets into positive territory, to "hopes that the European
Central Bank might cut interest rates earlier than expected."
Nokia was the day's top blue-chip performer with a rise of
2.9 percent after the global market leader unveiled two new
high-end models, reassuring investors it was on track to refresh
its offering for the key Christmas sales period.
"The portfolio renewal has started and this should boost
profitability," said Pohjola analyst Hannu Rauhala. Newer and
more expensive cellphone models usually have higher profit
margins than older and cheaper ones.
TECH RALLY
Thanks largely to Nokia's advance, technology was the day's
strongest sector <.SX8P> in Europe with a gain of 2 percent.
Telecommunications equipment makers Alcatel-Lucent <ALUA.PA> and
Ericsson <ERICb.ST> rose 4.7 percent and 2.6 percent,
respectively.
Basic resources, which includes mining, was the weakest
sector <.SXPP> with a loss of 0.9 percent as lingering worries
about global economic growth outweighed miner Rio Tinto <RIO.L>
reporting a better-than-expected 55 percent rise in first-half
profit.
Shares in Rio Tinto fell 0.6 percent, marginally
outperforming the sector after the company raised its interim
dividend by 31 percent and reaffirmed it would boost its
full-year payout in 2008 and 2009 by at least 20 percent in each
year.
Morgan Stanley, in a UK equity strategy note, said stocks
"offering a high and secure dividend yield are likely to perform
well over the next year" due to a greater focus on total returns
in a market with limited scope for capital appreciation.
High dividend-yield stocks tend to act as safe havens in
turbulent times, attracting risk-averse investors.
"Most (stock market) investors have not had a good year so
far," one trader said. "Nobody has any risk appetite."
Europe's top-300 index is on track for its ninth month of
losses in the last 10. It has fallen 22 percent this year, with
banks <.SX7P> down 33 percent after massive writedowns on
investments in risky U.S. mortgage securities.
UK banks featured among Tuesday's prominent losers, with
Lloyds TSB <LLOY.L> down 2.5 percent, Royal Bank of Scotland
<RBS.L> down 1.4 percent and HBOS <HBOS.L> down 1.3 percent.
CMC Markets said the banks came under pressure as rising
interbank rates reignited worries that the credit squeeze was
not over. The failure of another U.S. regional bank also
reinforced impressions that the sector continued to look
fragile, CMC said.
Mining stocks dropped as industrial metals lost ground, with
copper <MCU3> falling to its lowest level in almost a week as
rising inventories and a firmer U.S. dollar dampened sentiment.
Kazakhmys <KAZ.L> fell 3.5 percent, Anglo American <AAL.L>
2.6 percent and Xstrata <XTA.L> 2.5 percent.
Across Europe, Britain's commodity-heavy FTSE 100 <>
was down 0.6 percent while Germany's DAX <> climbed 0.7
percent and the French CAC 40 <> rose 0.3 percent.
(Additional reporting by Atul Prakash and Joanne Frearson in
London. Editing by John Stonestreet)
