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Banks lead European shares higher

LONDON, Oct 4 (Reuters) - European shares rose on Thursday but continued to trade in a tight range, with banks the best-performing sector ahead of the latest European Central Bank rate setting meeting.

The FTSEurofirst 300 index rose 0.3 percent to 1,104.14 points, recovering from two consecutive days of slight losses. The euro zone Euro STOXX 50 gained 0.5 percent to 2,504.21 points.

The STOXX European bank index rose 0.9 percent, after the European Banking Authority reported late on Wednesday that the region's banks had raised 205 billion euros in fresh capital to help them withstand the euro zone's debt crisis.

Some investors also expect that European Central Bank head Mario Draghi may provide hints about Spain's likely move regarding an international bailout following its rate decision on Thursday, which is expected to leave rates on hold.

"Whilst the economy doesn't look great, people are looking at the bigger picture and expecting that six months down the road, Euro-land is going to sort itself out," said McLaren Securities managing director Terry Torrison.

"The demand for equities is still there. There's no value being in bonds at the moment. Any time we have a pullback, the buyers come back out of the woodwork," he added.

(Reporting by Sudip Kar-Gupta; editing by Simon Jessop)

((sudip.kargupta@thomsonreuters.com)(+44 207 542 2773)(Reuters Messaging: sudip.kargupta.thomsonreuters.com@reuters.net))

Keywords: MARKETS EUROPE STOCKS/OPEN