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European stocks rebound before rate calls

Europe's main stock markets advanced on Thursday as tension eased over Portugal's political crisis, ahead of interest rate decisions by the Bank of England and the European Central Bank.

Caution prevailed with investors anxious after the removal of Egyptian president Mohamed Morsi, while trading was muted with US markets shut for the Independence Day public holiday.

In late morning deals, Lisbon's key PSI 20 index of leading shares rebounded 3.36 percent to 5,412.40 points, reassured by efforts to prevent Portugal's centre-right governing coalition from breaking up.

Portuguese stocks had plunged 5.31 percent on Wednesday after the shock resignation of two ministers, which had sparked a major selloff in Europe on fresh fears over the eurozone debt crisis.

In neighbouring Spain on Thursday, Madrid's IBEX 35 index gained 0.44 percent to 7,797.70 points.

London's FTSE 100 added 0.74 percent to 6,276.81 points, Frankfurt's DAX 30 won 0.51 percent to 7,868.34 points and in Paris the CAC 40 increased 0.63 percent to 3,725.46.

"Tentative gains for European markets Thursday with investors gearing up for policy meetings by the Bank of England and the European Central Bank together with debt auctions by Spain and France," said ETX Capital analyst Ishaq Siddiqi.

"Political instability in Portugal and the fluid situation in Egypt after Morsi was ousted by the military Wednesday prompts a generally cautious tone in Europe but overnight gains in Asian markets have lent a degree of support."

The Bank of England (BoE) will announce the outcome of its latest interest rate meeting at 1100 GMT, followed by the European Central Bank (ECB) decision at 1145 GMT.

The BoE, meeting for the first time under new governor, Canadian Mark Carney, is expected to keep its monetary policy on hold amid recent upbeat economic data.

The ECB is forecast also to maintain rates but the bank's head Mario Draghi may use his press conference to comment on market tensions arising from this week's crisis in debt-plagued Portugal, analysts said.

"The ECB governing council will meet today, amid renewed signs of financial tensions on some sovereign debt due to political fears," said Barclays analyst Apolline Menut.

"We expect the ECB to leave rates unchanged, but President Draghi will have to convince markets that the ECB's monetary policy will remain accommodative for a long time."

Both central banks are expected to leave their key interest rates at record-low levels of 0.50 percent, while the BoE is also forecast to leave unchanged its quantitative easing (QE) economic stimulus.

The European single currency fell to $1.2996, from $1.3010 late in New York on Wednesday, when it had fallen to $1.2923 -- a low last seen at the end of May.

Sterling fell to $1.5250 from $1.5278 on Wednesday, while the British currency it also dropped versus the euro.

On the London Bullion Market, the price of gold firmed to $1,250.40 an ounce from $1,250 on Wednesday.

Asian equities mostly rose on Thursday, with sentiment buoyed by more impressive jobs data from the United States but Tokyo struggled after the dollar fell back below the 100 yen mark in New York.

Bargain-buyers also provided some support after Hong Kong and Sydney suffered big losses in the previous session, but traders' main focus is the release Friday of US non-farm payrolls figures.

Tokyo slipped 0.26 percent but Hong Kong jumped 1.60 percent, Shanghai rose 0.59 percent and Sydney rallied 1.07 percent.

Wall Street ended in positive territory on Wednesday in shortened trade on the eve of the July 4 holiday.