Strong Earnings Boost European Shares

European stocks rose early on Thursday after results from bellwethers Societe Generale and France Telecom reassured investors, but a sharp rise in Spain's borrowing costs at a bond auction dampened the mood.

Shares in Societe Generale climbed 2.8 percent after a surprise surge in the French bank's trading revenues from its bond, currency and commodity desks helped soothe the effect of a series of one-off charges.

Other banks gained ground, with French investment bank Natixis up 1.6 percent, Spain's Bankinter up 1.5 percent and Italian lender Intesa SanPaolo up 0.9 percent.

At 0856 GMT, the FTSEurofirst 300 index of top European shares was up 0.5 percent at 1,049.62 points, halted by strong resistance around 1,053 points, representing the 38.2 percent Fibonacci retracement of the slide from mid-March to late April.

The euro zone's blue-chip Euro STOXX 50 index was up 0.7 percent at 2,307.35 points.

"Half of the Euro STOXX 50 stocks trade below their book value, which seems quite excessive to me, but the pull-back might not be over yet and it's like catching a falling knife," said Eric Galiegue, head of Valquant, a Paris-based financial research firm.

Spain's Treasury issued 2.5 billion euros in 3- and 5-year bonds on Thursday, at the top end of the targeted amount and on solid demand, but yields jumped from previous auctions in February and March, fuelling worries over the country's ability to deal with its debt pile.

Investors also awaited the European Central Bank policy meeting, when the bank is expected to keep interest rates on hold at 1 percent and resist calls to restart its bond-buying programme to ease pressure on Spanish debt.

The central bank has put on hold its programme for several weeks despite a rise in Spanish yields to 6 percent. A move above that, to 7 percent, is considered an unsustainable price to pay for refinancing the country's debt.

"Clearly, the hurdle to overcome is the (German) Bundesbank, which remains keen to fulfill its role as the euro zone's fiscal policeman now that question marks are being raised over France's commitment to cost cutting as (Socialist candidate Francois) Hollande inches closer to an election win on Sunday," Saxo Bank macro strategist Mads Koefoed said.

Around Europe, the UK's FTSE 100 index was up 0.5 percent, Germany's DAX index was 1 percent higher, and France's CAC 40 was up 1.1 percent.