* FTSEurofirst 300 up 0.3 pct, Euro STOXX 50 up 1 pct
* Markit's Eurozone Composite PMI figures reassure
* More than 2/3 of U.S. companies beat estimates
* Currency war 'real concern' -Valquant's Galiegue
By Blaise Robinson
PARIS, Feb 5 (Reuters) - European stocks rose on Tuesday as
signs of economic recovery in the euro zone helped soothe
investor worries a day after the return of political risks in
Spain and Italy sparked a sell-off.
Dutch telecom operator KPN bucked the trend,
sinking 16 percent after the debt-laden company unveiled a
rights issue of 4 billion euros ($5.4 billion) in an attempt to
avoid credit rating downgrades.
The FTSEurofirst 300 index of leading European
shares closed 0.3 percent higher at 1,154.47 points.
The euro zone's blue chip Euro STOXX 50 index
gained 1 percent to 2,651.21 points. It rebounded after a 3.1
percent slide on Monday sparked by worries over a corruption
scandal in Spain and polls showing Italy's former prime minister
Silvio Berlusconi regaining ground before elections this month.
Euro zone banks featured among the top gainers, with Spain's
Banco Santander up 3 percent and BBVA up 2.3
percent, while France's BNP Paribas added 1.9 percent.
Investors were reassured after figures showed the euro zone
economy is recovering, albeit slowly. Markit's euro zone
composite PMI, seen as a good indication of economic growth,
climbed to a 10-month high for January and was slightly above
the preliminary reading.
"Yesterday's spotlight on southern Europe was just an excuse
to book profits and catch our breath. The trend is still
positive, and clients are slowly coming back to equities,"
Kepler Capital Markets sales trader Patrice Perois said.
"U.S. earnings are much better than expected, there is no
worry on that front, and apart from a few accidents in Europe
such as KPN today and Saipem last week, results have
been relatively good here."
According to Thomson Reuters data, of the 53 percent of S&P
500 companies that have reported earnings so far, 69 percent
have beaten profit expectations.
Among the 19 percent of STOXX 600 Europe companies that have
reported results so far in the earnings season, only 35 percent
have missed analyst forecasts.
Shares in Munich Re gained 3.9 percent after the
world's biggest reinsurer raised its dividend more than
expected, posting below-average damage claims and surging
British oil company BP rose 1.4 percent after posting
fourth quarter results that beat expectations.
"All in all stocks are still undervalued, and the asset
class as a whole doesn't have much competition from the very low
returns you get from government bonds," said Eric Galiegue, head
of Valquant, a Paris-based financial research firm.
"The economic recovery in Europe is still at risk, but it's
priced in already. The real point of concern now is the currency
war and the strength in the euro. A further 10 percent rise in
the currency would trigger a 4 percent drop in earnings per
The euro has gained 3 percent against the dollar since the
start of this year on improving economic data and the view that
the worst may be over in the euro zone debt crisis.