Bank Shares Lift European Markets

European shares rose on Tuesday morning, with banking stocks the major risers on reports of talks about a Royal Bank of Scotland stake sale to Abu Dhabi investors and expectations of further monetary easing in the United States.

The pan-European FTSEurofirst 300 .FTEU3 index of top shares was up 0.7 percent at 1,096.40 points by 0840 GMT, having risen 0.9 percent on Monday after comment by U.S. Federal Reserve chairman Ben Bernanke.

RBS was the top mover, up 5.4 percent, even though two sources said a deal was not imminent.

"Although (the Abu Dhabi talk) is a positive for the stock in the short term ... in practice we may see votes against the government taking a large loss on its investment" said Atif Latif, director of equities and derivatives at Guardian Stockbrokers.

The market was also supported by comment from Bernanke which made it clear easy monetary policy would remain in place for some time and support the fragile recovery.

"It is a significantly more dovish tone from Bernanke, which will give a boost for stocks. The prospect of easy monetary policy will help the housing market in the United States," said Guy Foster, head of portfolio strategy at Brewin Dolphin.

"It will also have a knock-on effect to corporate financing and improve the terms of real estate loans. We are staying positive on risk and have a bias in favour of U.S. equities over European."