Banks Lift Euro Shares, but Oils Stall Rally

European shares closed up 0.7 percent after volatile trade on Thursday as banks pushed higher, but the market pared earlier gains as oil majors tracked crude prices lower and a rally on Wall Street lost steam.

The pan-European FTSEurofirst 300 index rose for a third straight day to end higher at 903.61 points, way off the day's high of 922.56.

The index has shed 40 percent of its value so far this year as a snowballing financial crisis has pushed the global economy to the verge of recession.

Banks gained after encouraging results from Deutsche Bank.

Deutsche shares gained 17.7 percent after the group avoided a third-quarter loss thanks to new accounting rules but unveiled heavy losses in proprietary trading as global financial markets remained rocky.

Norway's biggest player DnB NOR surged 23.5 percent, topping the gainers in Europe, after it also posted results that were not as poor as the market had expected.

Santander and UBS gained 3.7 and 3.2 percent respectively, while HSBC added 4 percent.

U.S. stocks were higher when European markets closed, but cut gains as recession fears offset hopes that a spate of interest-rate cuts by the world's central banks will help avert an acute downturn.

The Fed cut its benchmark fed funds rate by half a percentage point to 1 percent on Wednesday, action that was soon followed by cuts in Taiwan and Hong Kong.

Japan is expected to cut rates on Friday, while the European Central Bank, Australia and the Bank of England are expected to cut rates next week. China also cut on Wednesday.

"You're at 1 percent for the Fed, (so) there's not much more they can do, they're running out of ammunition fast," said Edmund Shing, strategist at BNP Paribas, in Paris.

"So now its up to the European Central Banks to cut rates, to try to maintain the liquidity in the market," he said. "The UK economy is degrading extremely quickly."

FTSE, DAX, CAC Across Europe, the FTSE 100 index was up 1.2 percent, Germany's DAX was 1.3 percent higher and France's CAC 40 rose 0.2 percent.

Oil groups Royal Dutch Shell and Total dropped about 4 percent, while BP shed 2.2 percent, as losses in crude oil overshadowed forecast-beating earnings from Shell.

Crude dropped to around $65 a barrel as the European stock market closed, pressured by concerns that demand might continue to weaken as the U.S. economy shrank in the third quarter.

In London mining shares rose across the board, with Vedanta Resources leaping about 16 percent, Kazakhmys up 12.2 percent and Antofagasta adding 8.8 percent.

Leading the losers in Europe, Irish drug-maker Elan slumped about 16 percent after U.S. marketing partner Biogen Idec reported a new case of a potentially deadly brain disease in a patient being treated with Elan's flagship drug Tysabri.

German potash supplier K+S fell 7.7 percent after cutting its full-year earnings goal, just two months after lifting it, saying the recent drop in agricultural commodity prices is weighing on fertilizer demand.

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