* FTSEurofirst 300 rises 0.5 percent, up for 7th straight day
* Financials pace gains, led by Santander, Axa
* Morrison's strong sales outlook boosts food retailers
* Nokia drops 2.9 percent after Morgan Stanley downgrade
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By Blaise Robinson
PARIS, July 21 (Reuters) - European shares were up 0.5 percent around midday on Tuesday, advancing for the seventh consecutive session and reaching a five-week high, led by buoyant financial stocks such as Santander and Axa.
At 1106 GMT, the FTSEurofirst 300 index of top European shares was up 0.5 percent at 885.85 points.
Food retailers were also among the biggest gainers, propelled by Wm Morrison's raised outlook for full-year results. Morrison surged 8.3 percent, Carrefour added 1.6 percent, Tesco rose 1.7 percent and Sainsbury climbed 2.5 percent.
Nokia, the world's top cellphone maker, dropped 2.9 percent after Morgan Stanley slashed its rating on the stock to "underweight" from "overweight", citing a "threat from rising competition in all segments".
"Although smartphone value share ticked up in the second quarter, we expect it to fall again, after a slew of recent competitor launches and potential expansion of the iPhone into China and new operators in Europe," Morgan Stanley analysts wrote in a note.
The FTSEurofirst 300 index, which is up 6.5 percent in 2009, has surged 8.8 percent over the past seven sessions -- the index's longest winning run since August 2007 -- powered by better-than-feared company profits.
"We're getting into a short-term overbought situation, so it would not be surprising to see consolidation down the road, but that would not change the medium-term improved technical picture," said Achim Matzke, European stock indexes analyst at Commerzbank, in Frankfurt.
So far in the current earnings season, 26 companies of Europe's STOXX 600 have posted results for the quarter, of which 12 have beat estimates, one has matched and 13 have missed the estimates, according to Thomson Reuters research data.
Improving corporate results and early signs of a global economic turnaround have sparked a debate about how and when policymakers will remove the unprecedented stimulus measures introduced as the credit crisis sent equity markets plummeting last year.
FED'S EXIT STRATEGY
In an opinion piece published on the Wall Street Journal's website, U.S. Federal Reserve Chairman Ben Bernanke said the huge amounts of money the U.S. central bank has pumped into the economy will not undercut its ability to push borrowing costs higher when the time is ripe, but stressed that the weak U.S. economy will likely warrant exceptionally easy policies for a long time to come.
The outline of the Fed's exit strategy from its extraordinary monetary policy easing offered a preview of the testimony Bernanke will give to Congress on Tuesday when he presents the Fed's twice-a-year economic report.
Around Europe, UK's FTSE 100 index was up 0.7 percent, Germany's DAX index up 0.9 percent, and France's CAC 40 up 0.9 percent.
Financial stocks were the biggest gainers, with Banco Santander up 0.9 percent, Axa up 2.7 percent and UniCredit up 1.8 percent.
Pharma stocks were also on the rise after Actelion and Elan posted forecast-beating results, with sales of key drugs helping shield the companies from the recession.
Actelion gained 3.9 percent and Elan rose 2.1 percent, while AstraZeneca climbed 1.3 percent and Novartis added 0.8 percent.
French luxury goods group Hermes rose 2 percent after posting a 12 percent rise in second-quarter sales, helped by strong demand for its leather bags. (Editing by Karen Foster)