Financials, oils drive European stocks higher

* FTSEurofirst 300 index closes up 1.8 pct

* Financials, oils gain

* Volkswagen recovers from earlier falls

By Joanne Frearson

LONDON, June 29 (Reuters) - European shares closed higher on Monday, with financials given a boost by broker upgrades and rising crude prices lifting energy stocks.

The pan-European FTSEurofirst 300 <.FTEU3> index of top shares closed up 1.8 percent at 859.63 points after falling nearly 2 percent last week.

The European benchmark index is up more than 33 percent from its lifetime low of March 9, as investors have become more confident on the prospects of recovery. It is set to finish the second quarter up more than 17 percent.

"So little on the agenda today ... but it is not a discouraging day, we had a down week last week, now we are just bouncing around and I think where we go depends on the next lot of economic data that comes out," said David Buik, partner at BGC Partners.

Banks added the most points to the index. BNP Paribas , Banco Santander and Barclays were 2.9-4.3 percent higher.

Lloyds gained 6.1 percent after Goldman Sachs upgraded its rating to "buy" from "neutral".

Other financials were given a boost by broker upgrades. Admiral Group ticked up 3.2 percent after Credit Suisse raised its rating for the insurer to "outperform" from "neutral" .

Munich Re rose 3.8 percent after UBS upgraded it stance on the reinsurer to "buy" from "neutral" .

Across Europe, the FTSE 100 <.FTSE> index was up 1.3 percent, Germany's DAX <.GDAXI> was 2.3 percent higher and France's CAC 40 <.FCHI> was up 2 percent.

VOLKSWAGEN RECOVERS FROM EARLIER FALLS

Energy stocks were higher as crude rose 2.8 percent just above $71 a barrel. BG Group , BP , Royal Dutch Shell and Total were up 2-4.1 percent.

Novo Nordisk jumped 6.9 percent, after falling around 5 percent last week, on expectations that sales of its modern insulins will benefit from concerns over the safety of Sanofi-Aventis rival drug Lantus. [ID:nLT465787]

Irish drugmaker Elan retreated 1.7 percent following earlier gains. The Sunday Times newspaper, said Swiss peer Novartis was in talks to buy parts of the group, including its flagship multiple sclerosis products and its Alzheimer's disease pipeline. [ID:nLS355247]

A spokeswoman for Elan said it did not comment on speculation. A spokesman for Novartis declined to comment. Novartis was down 0.5 percent.

Sanofi was up 1.5 percent, after plunging last week on concerns about imminent new research findings on Lantus and cancer.

Volkswagen recovered from earlier falls to gain 0.7 percent. Lower Saxony, Volkswagen's second-largest shareholder, said it is pushing VW and luxury automaker Porsche to break a deadlock in merger talks as the two German carmakers squabble over a deal and denied making any ultimatum which was "detrimental to the cause". [ID:nLT10323]

Earlier, Volkswagen had fallen after news reports over the weekend indicated that the power struggle with Porsche might have escalated with no clear solution in sight.

"There is a lot of uncertainty, and even contradictory reports, surrounding the whole affair, and investors could be exiting because they don't want to be caught off guard," a Frankfurt-based trader said. (Reporting by Joanne Frearson; Editing by Hans Peters)