STOCKS NEWS EUROPE-Burberry gains; Morgan Stanley upgrades

Shares in Burberry (BRBY.L) gain 3.6 percent as Morgan Stanley upgrades its rating on the maker of upmarket raincoats and handbags to "overweight" from "equal-weight", while lifting its target price to 465 pence from 431 pence.

"We think (Burberry) has potential to take share in a fragmented market as its brand position will make it more attractive vs. high-end luxury peers," says Morgan Stanley in a note.

However, the broker notes the potential for gross margin recovery in full-year 2010 depends on successful inventory control, and says the recent strength in sterling vs. Burberry's major currency exposures will dampen enthusiasm for earnings upgrades.

Reuters Messaging rm://tricia.wright1.reuters.com@reuters.net