* FTSEurofirst 300 rises 0.8 pct, up for 7th straight day
* Mining stocks top gainers on higher copper price
* Nokia drops 2.5 percent after Morgan Stanley downgrade
By Peter Starck
FRANKFURT, July 21 (Reuters) - European shares rose for the seventh straight session on Tuesday, reaching their highest close since early January, with mining and energy stocks in the lead while banks and mobile phone maker Nokia fell.
The FTSEurofirst 300 index of top European shares advanced 0.8 percent to 888.18 points -- its highest close since Jan. 6.
The European benchmark index has gained 37.5 percent since it hit a lifetime low on March 9.
"I am very confident about European stocks," said Gary Clarke, head of European Equity at fund manager Schroders.
The price-to-earnings ratio (P/E) of European shares at 11-12 was "very attractive", for example compared with U.S. stocks trading at a P/E of about 15, he said in a note, adding that dividend yields in Europe were higher than in the United States.
Credit Suisse in a global equity strategy note upgraded equities to "overweight".
"We are halfway through the first 'V' of an upward sloping W-shaped recovery, with a likely peak in early Q4. Corporates have to rebuild inventories, which could send global industrial production up 10 percent year-on-year," Credit Suisse said.
"Earnings revisions are now positive for the first time since August 2007," Credit Suisse said, adding that this was usually associated with stocks rising 5 percent over 3 months.
Federal Reserve Chairman Ben Bernanke, testifying before the House Financial Services Committee, said on Tuesday the outlook for the U.S. economy appeared to be improving.
Some bellwether U.S. companies, notably Caterpillar, reported quarterly earnings above market expectations.
Caterpillar, however, later warned that the third quarter will be "very tough" on sales and it was conceivable the company would lose money during the period, sending U.S. benchmark stock indexes into negative territory.
COPPER RALLY
In Europe, mining added the most points to the FTSEurofirst 300 index. Copper prices rose more than 2 percent to nine-month highs.
Anglo American gained 4.1 percent, BHP Billiton was up 2.6 percent and Rio Tinto added 2.3 percent. the DJ Stoxx basic resources index, which includes miners, rose 2.2 percent.
Crude oil touched a two-week high above $65 a barrel, lifting European energy stocks such as Total, up 1.7 percent, ENI, up 1.2 percent, and StatoilHydro, also up 1.2 percent.
Healthcare was another sector showing strength, AstraZeneca and GlaxoSmithKline rising 1.7 percent each.
Among food retailers Wm Morrison shot up 8.2 percent after the company raised its full-year outlook . Sainsbury climbed 3.1 percent, Carrefour added 1.7 percent and Tesco rose 1.4 percent.
Upmarket French luxury goods group Hermes rose 4 percent after posting a 12 percent rise in second-quarter sales, driven by demand for its handbags and perfumes.
Banks, which have outperformed the broader market with a rise of 122 percent since March 9, were among Tuesday's top losers, with CS Group down 3.6 percent, BNP Paribas falling 1.7 percent, UBS dropping 1.4 percent and Barclays closing 1.2 percent lower.
Nokia lost 2.5 percent after Morgan Stanley downgraded the stock to "underweight" from "overweight", citing a "threat from rising competition in all segments".
Around Europe, Britain's FTSE 100 index rose 0.9 percent, the German DAX added 1.3 percent and the French CAC 40 gained 1.0 percent while Zurich's SMI lagged with a gain of 0.2 percent. (Additional reporting by Blaise Robinson in Paris; editing by Elaine Hardcastle)