* FTSEurofirst 300 up 0.2 percent at 1,191.16
* Burberry rallies after 18 pct rise in Q1 sales
* Tesco, Ahold, Morrison's lifted by Exane upgrade
* UK banks higher after Moody's upgrade
By David Brett
LONDON, July 10 Consumer-focused stocks led
European shares higher early on Wednesday after a bullish update
from Burberry and analyst upgrades for retailers such as Tesco,
while weak trade data from China weighed on miners.
Shares in peripheral banks fell after S&P's sovereign credit
downgrade of Italy to BBB from BBB-plus, but the broader banking
sector rose 0.2 percent, boosted by heavyweight UK banks
such as Barclays, which gained after Moody's ratings
agency lifted the British banking system outlook to "stable"
Burberry rallied 5.7 percent after the luxury goods
brand maintained its full-year guidance as it posted an 18
percent rise in first quarter underlying retail revenue.
UK retailers Tesco and Wm Morrison and
Dutch firm Ahold rose as much as 1.7 percent after
Exane BNP Paribas upgraded all three stocks.
The FTSEurofirst 300 rose 2.21 points or 0.2
percent to 1191.16 points, by 0740 GMT, having closed at
one-month highs in the previous session, shrugging off the S&P
downgrade of Italy and China's weak trade data.
"The market has confidence at the moment, thus sentiment is
too positive to be upset by Italy's downgrade and China's trade
data," said Basil Petrides, trader at Hartmann Capital.
Last week's commitment from the Bank of England and the
European Central Bank to continued economic stimulus is
providing support for equities, with European shares up 3.6
percent since last Wednesday's close.
Basic resources fell just 0.2 percent on China's
weak trading update and "grim" outlook, with traders saying the
dismal trade data had spurred talk of more economic stimulus
from the world's second biggest economy.
Germany's Deutsche Bank added 1.8 percent after
Credit Suisse upgraded the investment bank to "outperform",
while Europe's biggest bank HSBC, up 0.2 percent,
remained its top pick.
However, analysts warned that despite recent gains the
market could still be vulnerable to a further correction.
The current short interest -- where investors borrow stock
to sell in order to buy back when share prices fall -- is 14
percent higher than the number seen at the start of the year,
according to data from Matrix.
"The big question is are we still in a bull trend or a
corrective phase? We are leaning towards a corrective phase,"
Gerry Celaya, chief strategist at Red Tower Research, said.
"We are looking at the current gains as being limited and
part of a broader pull back, which should be followed by a
pretty substantial drop into September and October," he said.
On a three-month view Celaya said the euro zone blue chip
index currently at 2,643 could fall as low as 2,060.