European shares halt sell-off; Portugal in focus

PARIS Mon Aug 4, 2014 3:18am EDT

PARIS Aug 4 (Reuters) - European stocks inched higher on Monday, halting last week's sharp sell-off, although trouble at Portugal's Banco Espirito Santo rekindled worries over the health of the euro zone banking sector.

At 0712 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,334.84 points, staging a technical bounce after dropping nearly 3 percent last week.

Following a frenzied weekend of discussions between Portuguese and European Union officials, Portugal agreed to spend 4.9 billion euros ($6.58 billion) to rescue Banco Espirito Santo, or BES, its largest listed bank, just months after the country exited an international bailout.

BES shares, which plunged 73 percent last week, were suspended since Friday afternoon.

Portugal's PSI 20 benchmark was flat, taking a breather following recent sharp losses. The index last week slipped into bear market territory, down 26 percent since early April.

Portuguese bond yields slipped on Monday, after Portugal's bailout plan reassured debt investors there would be no strain to public finances.

Portuguese 10-year yields dipped 1.4 basis points to 3.71 percent with the problems around BES essentially seen contained for now. (Reporting by Blaise Robinson; aditional reporting by Emelia Sithole-Matarise; Editing by Francesco Canepa)