Nokia and U.S. consumer cheer lift European shares

By Peter Starck

FRANKFURT (Reuters) - European shares rose on Tuesday, erasing some of the previous session's losses, led by mobile phone maker Nokia and with the broader market helped by a surprise improvement in U.S. consumer confidence.

The U.S. data sparked hopes that the worst might be over for the world's largest economy and outweighed a steeper-than-expected drop in German business confidence, which had sent the market lower during morning trade.

But traders and analysts said investors appeared risk-averse and saw no signs yet of a sustained stock market recovery.

"The markets will trade in a nervous zig-zag for the next few weeks," said Heinz-Gerd Sonnenschein, equity strategist at Postbank in Germany, citing uncertain prospects for economic growth and hence for commodities and currencies, as well as persistent financial industry worries.

The FTSEurofirst 300 index of top European shares rose 0.2 percent to 1,171.09 points. It lost 0.6 percent on Monday, when the UK stock market was closed for a holiday.

The index fell as much as 1.4 percent early on Tuesday after the closely watched Ifo business climate indicator for Germany, Europe's largest economy and the world's top exporter, came in below the market's consensus.

"The German economy will face a sudden and sharp downturn in the second half of this year leading to a fully-fledged recession," brokerage Steubing said in a note on the Ifo data.

"Corporate earnings are going to fall this and next year," Steubing said, adding: "We are underweight equities as we are convinced that next year's contraction isn't priced in."