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Europe: Results, banking sector bounce help shares recover

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[LONDON] European shares recovered on Wednesday from their biggest one-day loss in five months, as a rebound in banking stocks and some positive first-quarter results outweighed weakness in oil and gas stocks.

The pan-European STOXX 600 was up 0.2 per cent at its close, after hitting a three-week low on Tuesday.

Britain's FTSE extended the previous session's losses, dropping 0.1 per cent and giving up its year-to-date gains as sterling strength weighed on its constituents, most of which are major exporters after UK Prime Minister Theresa May called for a snap general election.

"While the headline level of the FTSE 100 Index often falls when sterling strengthens, it is important to look at the performance of the index's underlying constituent companies; those with domestic earnings and foreign costs have generally benefited materially," Edward Park, investment committee director at Brooks Macdonald asset management, said.

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Banking stocks snapped a six-day losing streak - their longest run of daily losses for 11 months - to rise 1.8 per cent, making them the top sectoral gainers.

Banco Popular and UniCredit were among top gainers, adding 5.5 per cent and 6.1 per cent respectively.

Sentiment was helped by Jefferies initiating coverage on Dutch bank ING Group with a "buy", saying ING shares had 18.7 per cent upside potential. ING rose 3.8 per cent.

Basic resources also bounced back, gaining 0.8 per cent, while oil and gas stocks fell 0.7 per cent as crude prices dipped on bloated US supplies.

Earnings, which began in earnest for European companies, were mixed.

Meal voucher group Edenred was a top gainer, up 5 per cent after it posted higher first-quarter revenue growth and maintained its targets, boosted by growth in Latin America.

"Overall, we are encouraged by the strong start to the year and believe it means full year forecasts are well underpinned," Barclays analysts said.

British luxury group Burberry was among the biggest European losers, down around 8 per cent after it reported a slowdown in its fourth-quarter comparable sales growth rate, saying tough conditions in the US outweighed an "exceptional"performance in its home market.

German retailer Zalando fell 4.8 per cent after it said it was happy with its first-quarter despite margin pressure due to post-Christmas sales discounting.

French media group Vivendi was the top CAC-40 faller, down 1.1 per cent after Italy's watchdog ordered the firm to cut its stake in Telecom Italia or Mediaset .

The Italian broadcaster reversed losses to end 1.6 per cent higher, while Telecom Italia also ended up 1.4 per cent. "Vivendi is very unlikely to sell down its 23.9 per cent TI stake, in our view," Jefferies analysts said.

Shares in British engineering group Cobham fell 8.7 per cent after 683 million new shares were added to trading in its rights issue, raising 512.4 million pounds.