Banks, utilities power Europe shares to end higher

* FTSEurofirst 300 index ends 1.1 percent higher

* Financials advance ahead of Federal Reserve's meeting

* E.ON's impressive results boost utility shares

By Atul Prakash

LONDON, Aug 12 (Reuters) - European shares ended higher on Wednesday after slipping in the past two days, with impressive results from E.ON (EONGn.DE) boosting utilities and banks up ahead of Federal Reserve statements on the state of the U.S. economy.

The FTSEurofirst 300 .FTEU3 index of top European shares was up 1.1 percent at 942.06 points. The index, which slumped 45 percent last year, is up 13 percent in 2009 and has surged 46 percent since March's lifetime low.

Germany's E.ON rose 5.4 percent after the world's largest utility said it saw signs that demand for energy was stabilising after a prolonged slump and tweaked its 2009 outlook higher after first-half profits beat forecasts.

"For the reminder of this year, this kind of profitability story is the main driver for people to revise next year's earnings forecasts higher and that's positive for the market," said Franz Wenzel, strategist at AXA Investment Managers.

"Equity markets could easily go higher by about 5 percent in the short term," he added.

The DJ STOXX European Utilities Index .SX6P was among the top sectoral gainers, up 2.6 percent. GDF SUEZ (GSZ.PA), Centrica (CNA.L), RWE (RWEG.DE) and Severn Trent (SVT.L) advanced between 1 percent and 4.3 percent.

Financial stocks were also among significant gainers ahead of the outcome of the U.S. Federal Reserve's policy-setting committee meeting at 1815 GMT, which is expected to hold its benchmark overnight rate in a range of zero to 0.25 percent.

The DJ STOXX banking index .SX7P was up 1.3 percent, while Barclays (BARC.L), Royal Bank of Scotland (RBS.L), BNP Paribas (BNPP.PA) and Natixis (CNAT.PA) rose between 2.1 and 5.4 percent.

"I don't think you are going to get anything negative out of the Fed today. What you want to see is a central bank that is not going to take any risks on the deflationary side and withdraw policy earlier," said Bernard McAlinden, a strategist at NCB Stockbrokers.

UBS AG (UBSN.VX) gained 3.1 percent after news that the Swiss bank and the U.S. government have agreed to settle a long-running dispute over the disclosure of names of wealthy American bank clients suspected of tax evasion. [ID:nN1296068]

Britain's Lloyds (LLOY.L) was up 6.4 percent. The bank said it would sell the bulk of its Insight Investment unit to Bank of New York Mellon (BK.N) for 235 million pounds ($386 million) as part of a shake-up of its asset management units.