* Pan-European FTSEurofirst 300 gains 1.1 pct
* Banks top gainers, Barclays jumps on capital raising
* M&A talk, $4 fall in oil price boost market
* Fed expected to hold interest rates
By Sitaraman Shankar
LONDON, June 25 (Reuters) - European stocks rose on
Wednesday, boosted by gains in banks, acquisition talk and a
lower oil price ahead of a Federal Reserve statement expected to
hold rates and stop short of signalling imminent increases.
The pan-European FTSEurofirst 300 <> index ended 1.1
percent higher at 1,227.65 points, with banks the top-weighted
gainers.
Barclays <BARC.L> led the sector higher with a 6.5 percent
jump after raising nearly $9 billion from investors including
Qatar and Japan's Sumitomo Mitsui <8316.T>.
Credit Agricole <CAGR.PA> jumped 7.3 percent, Royal Bank of
Scotland <RBS.L> gained 4.5 percent, HSBC <HSBA.L> rose 1.6
percent and Santander <SAN.MC> advanced 2.7 percent.
UBS <UBSN.VX> jumped 5 percent as a source familiar with the
situation said the bank had hired investment bank Lazard <LAZ.N>
as an adviser to help decide which businesses should be expanded
or slashed.
The DJ Stoxx European banking sector index <.SX7P>, the
sector worst battered by a crisis in credit markets, enjoyed its
best day in more than two months, gaining 3 percent.
Wednesday's rally comes in the middle of a weak month for
European stocks, which have lost 8 percent in June.
"This shows it is a gentle bear trend, and we don't see
things getting materially worse materially faster, but things
need to get materially better," said John Haynes, a strategist
at Rensburg Sheppard Investment Management.
"I'd expect the general tone of corporate guidance to be
pretty downbeat through the third quarter," he said.
Acquisition talk swirled, giving the market another shot in
the arm.
German auto parts supplier Continental <CONG.DE> jumped
nearly 9 percent on resurgent talk of private equity bid
interest. The company declined to comment.
And Deutsche Postbank rose 6.8 percent on a tide of European
bank takeover speculation even as German banks signalled
unwillingness to overpay for the country's biggest retail
lender.
ING <ING.AS>, Lloyds TSB <LLOY.L>, Deutsche Bank <DBKGn.DE>
and Santander <SAN.MC> were among interested parties, sources
familiar with the situation said. Their stocks rose by between
0.8 and 2.7 percent.
Across Europe, Britain's FTSE <> gained 0.6 percent,
while Germany's DAX <> rose 1.3 percent and France's CAC
<> ended 1.4 percent higher.
FED ON HOLD?
The Federal Reserve is widely expected to stay put at 2
percent when it announces its rate decision at 1815 GMT, but the
Fed's tone on inflation versus growth will be carefully watched.
The bank is expected to indicate slightly greater unease on
inflation but stop well short of signalling that higher rates
are imminent.
"If they don't keep rates steady they've obviously forgotten
how to speak English," said Haynes.
"Everybody's on message so anything that deviates from that
either in the action or the interpretation of the action will be
met with raised eyebrows, but I don't see any reason why they
will deviate from that," he said.
Earlier, data showed that U.S. durable goods orders held
steady last month but sales of new single family homes fell,
highlighting a weak economy.
One of the major drivers of inflation worry, crude, slid $4
a barrel after U.S. weekly data showed an unexpected increase in
crude oil inventories and sluggish fuel demand.
This was supportive of the broader market, but hurt stock in
Shell <RDSa.L> and Total <TOTF.PA>, which lost 0.7 percent and
0.3 percent respectively.
"On the one hand we have inflation and interest rates and
on the other hand, slower growth, and both are working against
us," said Fortis strategist Philippe Gijsels, adding that the
result may well be a shift of capital away from equities,
although low company valuations remained in favour of the asset
class.
(Additional reporting by Patrizia Kokot; Editing by Quentin
Bryar)
