European shares rose in midday trade on Monday, rallying for a second day, as oil and utility stocks led the charge buoyed by a rise in crude prices and as several banks gained ground.
At 1225 GMT, the FTSEurofirst 300 index of top European shares was up 2.1 percent at 913.98 points.
The index gained 4.2 percent on Friday, but has lost 39 percent this year, hit by fears the credit crisis may trigger a global recession.
Henk Potts, an equity strategist at Barclays Wealth, also pointed to the continued positive effect from upbeat comments on U.S. equities by billionaire investor Warren Buffett in an opinion piece he wrote for the New York Times last week.
"Like Buffett, we believe that many U.S. stocks are undervalued and that here as well there are good deals to be had," Potts said.
"But it's sort of like buying a convertible (car) in the dead of winter, you know you are going to get a good deal, but after getting hit with snowball after snowball in the face, you might second guess your decision," he said.
In Europe, the oil and gas sector was the strongest performer, tracking crude prices that rose 2.4 percent on expectations OPEC could cut output at an emergency meeting this week to lift prices that have lost more than 50 percent in three months.
BP, Royal Dutch Shell, gas producer BG Group and Total rose 4.2 to 6 percent.
Utilities got a lift from a combination of the rise in crude futures, a shift to defensive stocks and a positive note on some of the industry heavyweights from Deutsche Bank.
Shares in GDF Suez led the sector higher, rising 9.4 percent after Deutsche said the newly merged entity "offers an attractive potential return on a risk-adjusted basis relative to its peer group in the European utility sector."
Germany's RWE, which Deutsche Bank said was its top pick among utilities, was 5.7 percent higher, while former Deutsche favourite E.ON added 8 percent.
FOCUS ON FINANCIALS
Much of the focus remained on financials after European Central Bank President Jean-Claude Trichet pledged to do whatever it takes to restore confidence in financial markets.
He told France's RTL radio on Sunday the ECB was working closely with the U.S. Federal Reserve to solve the financial crisis.
Germany's cabinet on Monday approved strict conditions for banks which make use of its 500 billion euro ($674 billion) rescue package, including limits on managers' salaries, bonuses and severance.
Traders were doubtful the plan would be enough to help limit the longer-term impact of the financial crisis.
"This plan really just offers the bare minimum. It might be fine for the current situation, but should market and inter-bank lending conditions get worse, we don't think it will be enough," said one Frankfurt-based trader.
The interbank cost of borrowing dollars and euros fell across all maturities on Monday, while dollar spreads narrowed sharply, indicating a greater degree of willingness by the banks to lend to each other.
Several financial stocks were up. ING surged nearly 20 percent after agreeing to a 10 billion euro ($13.5 billion) Dutch cash injection.
Fortis jumped 15 percent, Lloyds TSB gained 5.8 percent, Royal Bank of Scotland rose 6.5 percent, Barclays was up 7.9 percent and UniCredit was up 0.54 percent.
But Societe Generale dropped 8.3 percent and Dexia shed 6.3 percent. Merrill Lynch analysts said SocGen and other European banks might need capital increases.
Britain's FTSE 100 index was up 2 percent, Germany's DAX rose 1 percent and France's CAC added 1.5 percent.
Ericsson, the world's biggest mobile network maker, rose 17.5 percent after stronger-than-expected third-quarter earnings.
Shares in Spanish air carrier Iberia soared 22 percent on hopes it is close to an agreement with merger partner British Airways following setbacks due to the British carrier's widening pension deficit.
But French water and waste management group Veolia fell 21 percent after cutting its outlook for investments and operating cash flow in 2008 due to the economic slowdown.
