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European stocks higher midday; banks, commodities rise

  European shares were up by midday on Wednesday, led by the banking sector as Deutsche Bank rose on hopes it will issue a strong outlook on Thursday and commodities tracked crude and metal prices higher.

By 1139 GMT the pan-European FTSEurofirst 300 index of top European shares was up 0.65% at 797.03 points. “Financials have set new lows over the course of the past couple of weeks. They have been extremely volatile. Overall the sector is in a wait-and-see mode (and) what they are waiting for is some more clarity about what is going to happen next, say with Obama’s rescue plan and the talk of (setting up) a bad bank,” said Philippe Gijsels, senior strategist at Fortis Bank.

“Meanwhile, the Bank of England has said they are also looking at other alternatives to cutting interest rates to somehow get these bad assets off the balance sheets of the banks so they can start functioning again. I think this is the major driver today in the banking sector,” added Gijsels.

US Senate Republicans on Tuesday offered their own, cheaper economic stimulus plans focused on tax cuts, pushing back against a $900 billion Democratic plan they say encourages too much new spending.

Banking stocks led the index higher, with Deutsche Bank up 5.4% on hopes that Germany’s biggest bank will be upbeat about 2009 prospects when it reports Q4 and full-year results on Thursday. HSBC, UBS and Lloyds Banking Group were up by between 2.6 and 5.3%.

Energy stocks were also among the biggest gainers in the index as crude oil prices rose 1.6%. BG Group, BP, Tullow Oil and Total were up by between 1.1 and 4.6%. Miners were on the rise as the price of copper gained 1.7%.

BHP Billiton rose 3.9% as it reported a 2.2% increase in first-half profits, aided by a last burst of Chinese demand growth. Analysts said BHP’s underlying earnings were largely in line with expectations. Anglo American, Antofagasta, Rio Tinto and Xstrata were up 3.9-8.7%.

DRUGMAKERS FALL

But drugmakers were on the slide, with Roche falling 8.7% after the group said it sees growth slowing this year and reported a 5% drop in its 2008 profit and missed expectations, hurt by a loss of Tamiflu drug sales and the strong Swiss franc.

AstraZeneca and Sanofi-Aventis were down 3.25% and 1%, respectively. Munich Re, the world’s biggest reinsurer, unveiled a disappointing drop in premiums at the start of the year as well as a sharp fall in 2008 earnings due to the financial crisis, sending its shares down 2.7%.

On the macroeconomic front there was some support from euro zone retail sales and service sector activity. Euro zone retail sales in December -- traditionally boosted by Christmas shopping sprees -- were unchanged against November and 1.6% lower than a year earlier, European Union statistics office Eurostat said.

“The figures are generally not too bad given sales in Germany were rather disappointing yesterday,” said Peter Vanden Houte at ING. “The fear was that we would see negative figures for the whole euro zone, but they were only flat month-on-month.”

The slight uptick in the Markit euro zone services sector index for January also provided some welcome news as it is the first rise since August, even though it marks the eighth month the index has been below the 50 mark that divides growth from contraction.

Across Europe, the FTSE 100 index was up 0.4%, Germany’s DAX was 0.7% higher and France’s CAC 40 was up 1.1%. (Reuters)