* FTSEurofirst 300 up 0.5 pct to near 1-year closing high
* Oils rise as crude tops $80
* Tesco up after Nomura raises target price
* Deutsche Bank shares fall after Q3 results
By Brian Gorman
LONDON, Oct 21 (Reuters) - European shares closed higher on Wednesday, with oils gaining as crude rose to more than $80 a barrel, and as U.S. companies continued to beat forecasts for third-quarter earnings.
The FTSEurofirst 300 index of top European shares rose 0.5 percent to close at 1,025.88 points, recouping almost all the loss from the previous session, and taking it to near its highest close since Oct. 3, 2008.
The index is up nearly 59 percent from its lifetime low on March 9, as investors have become more confident on the prospects of economic recovery.
"The general theme continues to be that the significant improvement we have seen in economic indicators also shows up in Q3 earnings," said Tammo Greetfeld, equity strategist at UniCredit Group. "All the fundamental factors in the equity market are still intact, and the upward strength will continue, though a breather is overdue."
Crude oil prices rose above $80 a barrel to one-year highs after U.S. government data showed inventories rose less than expected. The oil price was also supported by the dollar weakening to trade at more than $1.50 against the euro.
ENI, BP, Royal Dutch Shell and Repsol rose 0.7-1.2 percent.
U.S. financial services firm Morgan Stanley reported better-than expected quarterly profit on strong fixed-income sales and trading revenue and improved investment banking underwriting results, sending its shares up 6.9 percent.
Internet company Yahoo also rose, up 3.9 percent, after its earnings pleased the market.
As European bourses were closing, the Dow Jones, S&P 500 and Nasdaq Composite were up 0.4-0.7 percent.
Across Europe, Britain's FTSE 100 and Germany's DAX closed 0.3 and 0.4 percent higher respectively; France's CAC-40 rose 0.05 percent.
BANKS REVERSE LOSSES
Banks, which had been lower for much of the day, were mostly up by the close. Natixis surged 11.4 percent after Credit Suisse upped its price target to 5.7 euros, from 4.2, on the loss-making French investment bank, keeping an 'outperform' rating.
Index heavyweights Banco Santander and HSBC ended the day up 1.8 percent and 1.3 percent respectively.
But Deutsche Bank dropped 2.4 percent after Germany's biggest bank said tax credits had flattered net profit in the third quarter.
Among other individual shares, British supermarket operator Tesco rose 2.3 percent after Nomura raised its target price to 526 pence, from 405 pence.
Tesco's British margin is likely to step change to 7.2 percent from 6.2 percent, said Nomura, as it pointed to the potential for the company's banking, telecoms and online businesses. French peer Carrefour rose 1.6 percent.
French carmaker Peugeot fell 4.8 percent after it said third-quarter revenue slowed less sharply than in previous quarters, but analysts at Morgan Stanley analysts said sales were still disappointing.
Fiat also dropped, down 2.0 percent after the company reported a better-than-expected third-quarter trading profit but said it might write off past investments.
Spain's Grupo Ferrovial fell 2.3 percent after agreeing to sell London's Gatwick Airport for 1.51 billion pounds ($2.46 billion) to a consortium involving Credit Suisse and General Electric.
Collins Stewart cut its target price for Ferrovial by 8 percent, and maintained its 'sell' rating.
Chipmaker STMicroelectronics fell 4.6 percent after posting its seventh consecutive quarterly loss. (Additional reporting by Christoph Steitz; Editing by Dan Lalor)