European shares rose early on Tuesday as tech and energy stocks helped the market bounce back from the previous session's sharp drop but banks such as UBS and Credit Suisse slipped again on credit market concerns.
At 5 a.m. EST the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,466.27 points, after gaining as much as 0.9 percent in early trade. The benchmark index, which fell 2.1 percent on Monday, is down 1.2 percent on the year.
The market could regain some upward momentum, but obviously for now, this looks like a dead cat bounce, said Franz Wenzel, strategist at AXA Investment Managers, in Paris.
We should not be too enthusiastic about what we see in the European markets. We're not yet out of the woods. For that we would definitely need the U.S. market to regain some positive momentum, and that's not what we have currently, he said.
We think that recent news coming out of the Fed are clearly tipping the balance to another rate cut, presumably at the beginning of December.
Equities worldwide have been hit over the past few months by fears that the meltdown in the U.S. subprime mortgage market would dampen corporate profits and dent global growth, prompting the U.S. Federal Reserve to cut interest rates.
On Monday, Swiss Re joined a growing list of financial companies -- including Citigroup Inc, Merrill Lynch & Co Inc and Morgan Stanley -- that have reported huge losses from worsening conditions in consumer credit and capital markets.
Shares of Citigroup Inc, the largest U.S. bank, tumbled on Monday after Goldman Sachs downgraded the stock to sell from neutral, and said the bank may have to write off $15 billion.
European banking shares fell again on Tuesday, on renewed concerns that financial institutions have not yet revealed the full impact of the crisis in the credit market in their books.
Credit Suisse shed 1.9 percent, Fortisdropped 2.7 percent, and UBS fell 0.6 percent.
On the year, the Dow Jones STOXX bank index is down nearly 20 percent.
Although UBS confirmed again last week that it would have a profitable fourth quarter, rumors are growing today again about a further writedown worth $9 billion, said analysts at Vontobel in a note.
A company spokesman was not immediately available for comment.
Around Europe, Germany's DAX index was up 0.7 percent, the UK's FTSE 100 index up 0.4 percent and France's CAC 40 up 0.3 percent.
Tech and telecom shares tended higher, with Nokia up 2.2 percent and Vodafone up 1.4 percent.
German telecoms operator Versatel rose 5 percent after the company's third-quarter results beat expectations.
Energy shares also rose along with crude oil prices. Total gained 1.2 percent and Royal Dutch Shell added 1.3 percent.
Oil rose more than 1 percent to above $95.60 a barrel.
(Additional reporting by Thomas Atkins in Zurich; Editing by Rory Channing)