European shares up, led by banks, but utilities fall

European share indexes rose on Monday as remarks by executives of Barclays and Deutsche Bank eased fears of losses from the recent credit market turmoil, but utilities fell after news of a big French merger.

Shares in Barclays were up 3.3 percent after the president and head of investment banking at Britain's third-largest lender said the bank was weathering the storm and did not expect losses to be material.

Deutsche Bank's shares rose 1.3 percent after the German bank's chief executive said banks and investors affected by the credit market jitters had apparently taken risks that exceeded their size and risk-bearing capacity, calling that negligence.

We find it hard to believe that a CEO would make such clear statements if, at the same time, the bank's own Q3 figures were at a miserable level, DZ Bank analyst Matthias Duerr said.

At 6:45 a.m. EDT the FTSEurofirst 300 index of top European shares was up 0.3 percent at 1,540.1 points, having earlier hit 1,541.78 points -- its highest since August 9.

Volumes were light with markets in the United States closed for a public holiday.

Bank shares were up 0.8 percent on the DJ EuroStoxx sector index, with Sweden's Handelsbanken 7.8 percent higher on news that Norwegian insurer Storebrand would buy its life insurance arm for a higher than expected $2.6 billion.

Storebrand fell 6.4 percent.

The best performing DJ Stoxx European sector index was autos, up 1.8 percent, led by a 3.6 percent advance for DaimlerChrysler after Deutsche Bank raised its target price to 100 euros from 86 euros.

The German carmaker would have significant funds available for distribution to shareholders also after the 7.5 billion euro buyback program announced last week, Deutsche Bank said.

The DJ Stoxx European utilities sector index fell 0.9 percent. Investors booked profits on shares in Suez after it jointly announced a 90 billion-euro ($123 billion) merger with Gaz de France to create Europe's third-largest power company. But other utilities were also down, with EON typically down 0.9 percent and Severn Trent down 0.7 percent.

Suez shares were down 3.8 percent.

AWAITING ECB

Around Europe, London's FTSE 100 index and Frankfurt's DAX rose 0.4 percent and 0.3 percent, respectively, while the French CAC 40 fell 0.1 percent.

Carrefour, down 1.6 percent, was one of the largest weights on the CAC 40 index after brokerage Bernstein cut its price target on the supermarket chain's stock.

Eyes were turning to Thursday's monetary policy meeting of the European Central Bank, which is expected by a majority of economists polled by Reuters to leave interest rates unchanged.

No one is taking any big positions. What we've been watching over the weekend is where the rest of the subprime debt (exposure) is, said Justin Urquhart Stewart, a director of 7 Investment Management, adding financial markets finally appear to be stabilizing as the subprime-related newsflow has slowed.

Goldman Sachs said it remained unclear how vulnerable the Euroland financial sector still is and how damaging a rate hike might be. The ECB's decision would depend on how markets behave, Goldman Sachs said.

Current turbulent conditions are much too unstable to allow a rate hike, Bear Stearns said. We don't look for any rate action at this meeting and now think that the ECB may be on hold for the remainder of 2007.

Some analysts said stock market investors seemed carefree.

Equity investors are hoping that central banks will save the day and remain complacent to downside risks from the crisis in debt markets, JPMorgan said in a research note.

And Credit Suisse said: For the first time in eight years, equity sector risk appetite is much higher than overall risk appetite.

(Additional reporting by Amanda Cooper in London)