* FTSEurofirst 300 index rises 0.7 percent
* Defensive stocks leading rally
By Joanne Frearson
LONDON, Sept 20 (Reuters) - European shares rose on Tuesday in a short-covering rally following the previous session's sharp losses, led by defensives such as utilities.
German utilities RWE and E.ON (EONGn.DE) rose 3.3 percent and 2.9 percent respectively to top the German DAX after a German court suspended the enforcement of nuclear fuel taxation at E.ON's Grafenrheinfeld plant.
By 0819 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.7 percent at 922.73 points after being as low as 910.04. It had fallen 2.3 percent in the previous session.
Traders said that the gains could be short-lived after a surprise downgrade of Italy's credit rating by Standard & Poor's, which showed that euro zone debt issues had not gone away.
"It is not a huge move up and probably just a bit of short covering," said Louise Cooper, Markets analyst at BGC Partners.
"It is not an environment where people are going in and taking hugely aggressive positions, volatility is so scary it is not like people are piling in."
There were still concerns the region's debt crisis could be spreading to other countries after S&P cut Italy's credit rating by one notch. There is also still uncertainty over Greece's next aid tranche.
French banks were among the worst performers, with Societe Generale and BNP Paribas down 2.2 percent and 2.6 percent respectively.
The Bank of China has stopped foreign exchange forwards and swaps trading with several European banks -- including some French banks -- due to the euro zone debt crisis.
German engineering firm Siemens (SIEGn.DE) withdrew deposits from Societe Generale in July but the withdrawal was unrelated to the French bank's financial health, a Paris-based source told Reuters. (Reporting by Joanne Frearson) ============================================================ For rolling updates on what is moving European shares please click on ============================================================ For pan-Europeanmarket data and news, click on codes in brackets: European Equities speed guide................... FTSEurofirst 300 index.............................. STOXX Europe index.................................. Top 10 STOXX sectors........................... Top 10 EUROSTOXX sectors...................... Top 10 Eurofirst 300 sectors................... Top 25 European pct gainers....................... Top 25 European pct losers........................
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