By Helen Reid and Kit Rees
LONDON (Reuters) - European shares edged higher on Thursday as investors welcomed results from Man Group and Pandora maintained its outlook, while French equities outperformed ahead of the first round of France's presidential election.
The pan-European STOXX 600 <.STOXX> index ended the session 0.2 percent higher.
France's CAC 40 <.FCHI> outperformed peers, jumping 1.5 percent and marking its best day since the beginning of March.
Banking stocks, which are regarded as bellwethers for the economy, led the CAC 40 higher, with BNP Paribas and Societe Generale up 4 and 2.8 percent respectively. Some analysts suggested that investors were closing out short positions ahead of the vote.
"Few days ahead of the French elections, almost anything is possible based on the polls. The worst outcome for markets is if Le Pen and Melenchon are in the 2nd round, in our view, as markets could start pricing Frexit risks," strategists at Bank of America Merrill Lynch said in a note, referring to far-right candidate Marine Le Pen and the far-left's Jean-Luc Melenchon.
More broadly, European banks also rose, up 0.8 percent. UBS on Wednesday upgraded the sector to 'neutral' from 'underweight', citing rising reflation expectations and a seemingly more benign regulatory environment.
Even the struggling UK FTSE 100 <.FTSE> managed to post a 0.1 percent gain, despite coming under pressure this week after British Prime Minister Theresa May called a snap general election, a move that sent sterling to a more than 6-month high.
"The inverse correlation of FTSE with sterling is logical because of the overseas earnings of the FTSE, so if sterling continues to move, that will have a significant effect on that trade-off between large, international companies and more domestic companies," said Simon Gergel, CIO for UK Equities at Allianz Global Investors.
Earnings-related newsflow drove the top gainers, with Pandora up 5 percent, regaining ground after a broker downgrade hit it earlier in the week. The company updated its financial reporting structure, confirming its 2017 outlook.
In another sign of a better backdrop for the asset management industry, British hedge fund Man Group shares rose 4 percent after it reported net inflows over the first quarter.
"This is a very strong start to the year that is likely to lead to consensus upgrades," said Liberum analysts.
Earlier this week peer fund manager Ashmore posted net inflows for the first time in nearly three years, and on Wednesday Henderson posted first quarter results, showing assets were cushioned by market gains in the period.
Energy sector stocks were in the red, however, reeling from a sharp slide in oil prices overnight. Lundin Petroleum and Tullow Oil were among the top fallers in the sector <.SXEP>.
(Reporting by Kit Rees and Helen Reid)