PARIS (Reuters) - European stocks rose on Tuesday to a ten-week high, as banks rallied on hopes the worst of the credit crunch might be behind, but the gains were limited by a drop in energy shares, falling along with crude oil prices.

The mining sector also retreated amid mixed metal prices and after a sharp rally over the past two weeks.

The FTSEurofirst 300 index of top European shares unofficially closed 0.3 percent higher at 1,567.97 points, its highest close since July 25.

Shares of financial institutions led the rally as investors were relieved by increased clarity about the impact of the squeeze in the credit markets on banks' results.

"It has been a crisis of information. We know there is a wolf in the sheepfold but we don't know where. So when a bank comes out with negative news, the market is relieved because at least it sheds light on the situation," said Pascal Blanque, chief investment officer of Credit Agricole Asset Management.

UBS (UBSN.VX: Quote, Profile, Research), which warned on Monday it would report a third-quarter loss after writedowns of 4 billion Swiss francs (1.66 billion pounds), gained 3 percent, while Royal Bank of Scotland (RBS.L: Quote, Profile, Research) surged 3.7 percent and Barclays (BARC.L: Quote, Profile, Research) jumped 3.6 percent.