European shares steady, yen weak, oil recovers

By Gerrard Raven

LONDON (Reuters) - European shares were steady on Monday after strong rallies on Asia's bourses, with the banking sector outperforming in a critical week, led by Britain's Barclays (BARC.L: Quote) which was up 5.9 percent.

The yen hit a four-month low against the dollar but suffered against the euro as risk appetite improved on the news from Barclays and relief that the weekend meeting of Group of Eight finance ministers had passed off without major surprises.

Wall Street looked set to open slightly firmer but results from Lehman Brothers Holdings Inc. LEH.N, which is expected to post its first ever quarterly loss, are due at 8:15 a.m. EDT, well ahead of the opening bell.

Barclays said it planned to sell stakes to outside investors and offer shares to existing shareholders to boost its balance sheet. Weekend press reports said it could secure almost $8 billion from sovereign wealth funds in the next two weeks.

Its gains lifted banks across Europe in a important week for the sector which sees U.S. investment firms Goldman Sachs (GS.N: Quote) and Morgan Stanley (MS.N: Quote) report second-quarter earnings on Tuesday and Wednesday respectively. Commerzbank (CBKG.DE: Quote) rose 1.75 percent.

"The focus will be on the U.S. banks this week -- I expect Goldman to be solid and hope that all the bad news is out of the way on Lehman," said Heinz-Gerd Sonnenschein, strategist at Deutsche Postbank in Bonn.

Brighter news from banks was balanced by losses in the food production sector. Unilever (ULVR.L: Quote) and Cadbury (CBRY.L: Quote) fell between 2 and 3.5 percent after investment bank UBS downgraded the sector to a "sell" rating.

The FTSEurofirst 300 index of top European shares was down 0.07 percent at 1,266.45 points, and Britain's FTSE 100 was 0.16 percent lower.