By Peter Starck

FRANKFURT, May 12 (Reuters) - European shares rose in quiet trade on Monday led by HSBC <HSBA.L>, Europe's biggest bank, on better-than-expected results, and energy stocks on the back of high crude oil prices.

HSBC rose 1.9 percent after reporting a year-on-year rise in quarterly profit as growth in Asia and elsewhere helped counter a $3.2 billion bad-debt charge related to its U.S. consumer finance business. Some analysts had expected a quarterly loss.

"Group profit up on Q1, 2007...is a claim few banks in Europe will be able to make," Collins Stewart said in a note. "HSBC remains a safe haven and core holding for us."

Collins Stewart rates HSBC "buy" with a target price of 999 pence.

HSBC shares were the biggest positive weight on the FTSEurofirst 300 <.FTEU3> index of top European shares, which rose 0.3 percent to 1,346.47 points, after posting its first weekly loss in a month last week.

Volumes were thin on Monday due to a partial holiday in many European countries. "Mostly we've been watching Wall Street," one Germany-based trader said.

Energy stocks underpinned the gains, with France's Total <TOTF.PA> up 1.4 percent and BP <BP.L> 1.1 percent higher. U.S. June crude oil futures <CLM8> hit a record $126.40 a barrel while Brent <LCOc1> remained in sight of Friday's record highs.

"The high oil price is helping the oil sector and the commodity sector is also doing well, but the more the oil price rises, the more it becomes a problem for the overall economy so it's not universally bullish," said Ronan Carr, equity analyst at Morgan Stanley.

Overall, Morgan Stanley said investors should be cautious.

"This is strength to sell into. We think we are very early in the downgrade cycle," the U.S. investment bank said in a European equity strategy note.

RIGHTS ISSUE?

The FTSEurofirst has risen 12.3 percent since hitting a 2-1/2 year low in mid-March but remains down 10.5 percent for the year to date.

On Monday, gainers on the index outnumbered losers by about three to two.

Among heavyweight decliners, Barclays <BARC.L> fell 1.5 percent ahead of an interim trading update on Thursday expected to disclose whether the British bank plans to go ahead with a rights issue.

"We expect Barclays' ... statement on May 15 to provide the catalyst for a wave of earnings downgrades," Citigroup said, cutting its price target to 350 pence from 400 pence and reiterating its "sell" recommendation.

"With uncertainty remaining over financial exposures and the group's balance sheet strength, we expect the shares to remain under pressure," Citigroup said in a note.

German steelmaker Salzgitter <SZGG.DE> rose 4.5 percent to 141 euros after Credit Suisse raised its price target to 201 euros from 189 euros.

Shares in fellow steelmaker ThyssenKrupp <TKAG.DE> rose 2.9 percent. Cazenove upgraded the stock to "in line" from "underperform".

French luxury goods group Hermes <HRMS.PA> gained 6 percent as traders cited market speculation of stakebuilding in the maker of silk scarves and Birkin handbags. Officials at Hermes could not be immediately reached for comment.

British mid-cap Chloride Group <CHLD.L> jumped almost 35 percent after the company, whose products protect against power shortages, said it had rejected a takeover approach, which it said materially undervalued it. (Additional reporting by Blaise Robinson in Paris and Toni Vorobyova in London; editing by Sue Thomas) (([email protected]; +49 69 7565 1217; Reuters Messaging: [email protected]))

Keywords: MARKETS EUROPE STOCKS/

 
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    For rolling updates on what is moving European shares  
    please click on [STXNEWS/EU] 
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 For pan-Europeanmarket data and news, click on codes in  
 brackets: 
 European Equities speed guide...................<EUR/EQUITY> 
 FTSEurofirst 300 index..............................<.FTEU3> 
 DJ STOXX index......................................<.STOXX> 
 Top 10 STOXX sectors...........................<.PGL.STOXXS> 
 Top 10 EUROSTOXX sectors......................<.PGL.STOXXES> 
 Top 10 Eurofirst 300 sectors...................<.PGL.FTEU3S> 
 Top 25 European pct gainers.......................<.PG.PEUR> 
 Top 25 European pct losers........................<.PL.PEUR> 
    Main stock markets: 
 Dow Jones...............<.DJI>  Wall Street report .....[.N] 
 Nikkei 225.............<.N225>  Tokyo report............[.T] 
 FTSE 100...............<.FTSE>  London report...........[.L] 
 Xetra DAX.............<.GDAXI>  Frankfurt market stories[.F] 
 CAC-40.................<.FCHI>  Paris market stories...[.PA] 
 World Indices......................................<0#.INDEX> 
 Reuters survey of world bourse outlook..........<EQUITYPOLL1> 
 Western European IPO diary...........................[WEU/IPO] 
 European Asset Allocation.........................[EUR/ASSET] 
    Reuters News at a Glance: Equities...............[TOP/EQE] 
    Main currency report:...............................[FRX/] 
  Keywords: MARKETS EUROPE STOCKS/ =2