European shares end higher led by banks and energy stocks

By Joanne Frearson

LONDON (Reuters) - European shares closed higher on Tuesday in choppy trade with the banking sector recovering after earlier falls and energy stocks rising as crude bounced from 3-1/2 year lows.

The FTSEurofirst 300 index of top European shares was up 1.9 percent at 825.31 at close in a volatile session having been down as much as 792.43 points and up as high as 827.55 points.

"We may have touched a bottom at the end of November and we are starting to see a year end rally though it is going to be a fairly shallow one. The market is extremely volatile at the moment," said Franz Wenzel, strategist at Axa Investment Management.

"The anticipation that the ECB is going to cut interest rates by around 75 or even 100 basis points Thursday is also giving a boost to the market. Though the roller coaster ride should continue for sometime," said Wenzel.

Energy stocks gained the most points on the index. BP, Royal Dutch Shell and Total rose 2.6-2.9 percent.

Crude bounced after falling to a fresh 3-1/2 year low on Monday, following OPEC's weekend decision to defer any further output cut until mid-December. But, it slipped towards the end of stock market trade and was down $1 at around $48.35 a barrel.

Banks also contributed to sizable gains on the index, although stocks within the sector were mixed.

Royal Bank of Scotland soared 16.8 percent ahead of a re-weighting of the stock in both the FTSE 100 index and the MSCI Europe after the close Tuesday.