European stocks halt sharp sell-off, eyes on ECB

European stocks moved higher around midday on Thursday, as BNP Paribas's stellar results helped the market halt a sharp sell-off sparked by escalating fears that Greek debt woes spread to other euro zone countries.

Mining shares, recently hit by worries over Australia's new tax on mining, were among the top gainers, with Xstrata up 3.6 percent and Anglo American up 1.1 percent.

At 1030 GMT (11:30 a.m. British time), the FTSEurofirst 300 index of top European shares was up 0.6 percent at 1,029.31 points in a roller-coaster session that saw the index falling by as much as 1.1 percent in early trade, before bouncing back.

France's BNP Paribas, the euro zone's second biggest bank after Spain's Santander, rose 3.2 percent after posting forecast-beating results that overshadowed the bank's 5 billion euro (4.24 billion pounds) exposure to Greece that the lender revealed on Thursday.

Germany's Commerzbank also gained ground, up 3.8 percent after posting better-than-expected first-quarter results thanks to strong trading and lower risk provisions.

Europe's banking index was up 0.7 percent. But despite Thursday's tentative rebound, the sector is still down 8 percent in 2010, Europe's worst sector performance.

The FTSEurofirst 300 index has tumbled around 8 percent over the past three weeks and strongly under performed U.S. stock indexes, beaten down by mounting worries sovereign debt in the euro zone.

"Stocks have lost around 10 percent, and we could drop another 10 percent in the short term. The market will remain hectic until the billions promised to Greece materialise. But the (debt crisis) doesn't change anything for companies, whose results have been excellent" said Romain Boscher, chief investment officer at Groupama Asset Management in Paris.

RELIEF FROM GERMAN DATA

The 110 billion euros bailout of Greece unveiled over the weekend failed to dissipate concerns on whether the debt-stricken country can sustain the tough austerity measures, and worries on the risk of contagion to other countries such as Spain and Portugal, whose credit ratings were downgraded last week.

"We are now in a situation of total risk aversion ... it is important to reduce risk but stay in the market because when it turns, and it will, it'll be fast forward again" said Pehr Blomquist, fund manager at Catella, in Sweden.

Investors, who were bracing for the European Central Bank's decision on interest rates and following press conference due on Thursday afternoon, found some relief in macroeconomic data.

German manufacturing orders rose by 5.0 percent on the month in March, official data showed, matching the most optimistic of forecasts and completing a strong upturn in demand in the first quarter.

The ECB is seen keeping rates on hold, while investor focus will be on the central bank's comments on the current debt crisis. The rate decision is due at 1145 GMT and the news conference will start at 1230 GMT (1:30 p.m. British time).

Around Europe, UK's FTSE 100 index was up 0.3 percent, Germany's DAX index up 0.7 percent, and France's CAC 40 up 0.5 percent.

Telecom gear maker Alcatel-Lucent sank 6 percent to a near-three-month low after reporting a much wider first-quarter net loss than expected and missed revenue forecasts, blaming a shortage of components.

Swiss Re surged 4.7 percent after the world's second-biggest reinsurer said it has boosted its capital by around $3 billion, giving it confidence it can repay a costly convertible loan from billionaire Warren Buffett and regain a key credit rating.