* FTSEurofirst 300 up 0.4 pct
* BP, Saipem fuel energy rally after results
* Deutsche Bank, UBS hit, raise buffers for legal costs
By Toni Vorobyova
LONDON, Oct 29 (Reuters) - European shares edged higher onTuesday as estimate-beating results at BP and Saipem fuelled a surge in the oil sector, a laggard in thisyear's equity rally.
Adding to the upbeat crop of results, Finnish handset makerNokia forecast a more profitable future for its NSNnetwork equipment and software unit, sending its shares up 7percent.
With the third quarter results season about a third of theway through, European companies have so far beaten earningsexpectations by an average of 1.7 percent, behind their U.S.peers but on track to end two consecutive quarters of misses,according to Thomson Reuters StarMine data.
"Overall, it's a fairly mixed bag but with a bit of positiveupside on earnings so far," said Neil Marsh, managing directorof cash equities at Newedge.
"I still think we will have positive momentum going into theend of the year. Fundamentals look reasonably good, the economicdata is not appalling like it has been, it's showing signs of atleast bottoming out so it's fairly bullish at the minute."
The FTSEurofirst 300 rose 0.4 percent to 1,288.06,less than 5 points away from last week's five year peaks.
The energy sector was responsible for most of those gains,with heavyweight BP up 5.6 percent after it unveiledforecast-beating results and promised to sell more assets andreturn the proceeds to shareholders.
"The underlying numbers look close to expectations but thegood news is an increase in the dividend, an extension of thebuy-back programme and a commitment to keep capex flat in 2014,"analysts at Liberum Capital said in a note.
The rebound in BP follows a tough year, when the sharesgained roughly half as much as the broad European market while the oil and gas sector as a whole hasbeen the second worst performer after basic resources,on concerns about falling crude prices and rising costs.
Negative market positioning and sentiment have set the barrelatively low for positive surprises.
Among the least-loved stocks has been Italian oil servicesgroup Saipem, which confounded market bets for a third profitwarning on Tuesday by confirming its earnings outlook for theyear.
Shares in Saipem jumped 4.7 percent on the news, which wrongfooted an active short-selling market in the stock. Shortsellers borrow shares they do not own and sell them on, in thehope of buying back the stock more cheaply later on.
As of Oct. 28, some 15.6 percent of Saipem's sharesavailable to be borrowed were out on loan to short sellers,Markit data showed, a multi-year high if periods around dividendpayments, when arbitragers borrow the stock for tax purposes,are excluded.
Volumes in Saipem were nearly six times their 90-day dailyaverage, making it the most actively traded stock onFTSEurofirst 300, followed by UBS at five times the average.
Shares in the Swiss bank dropped 7.7 percent onnews it has been ordered to hold extra capital in case it has topay out more in legal settlements.
"They (regulators) are looking for a pound of flesh ... andI think that's the way it's going to be from now on," said NickXanders, head of strategy at BTIG. "The sector has started toroll over and I think it will continue."
- Investment & Company Information