European shares set for worst week in three months as trade worries bite

LONDON (Reuters) - Strong financials stocks and better-than-expected French economic data helped drive a timid relief bounce in European shares at the end of a tumultuous week marred by trade war worries.

The pan-European STOXX 600 and its euro zone counterpart were set for their biggest weekly loss in three months as the realities of rising global protectionism sank in, particularly for the autos sector.

French business activity was stronger than expected in June as a better services sector compensated for weaker manufacturing.

Investors were also keeping an eye on German and euro area PMIs out this morning.

The STOXX was up 0.3 percent by 0730 GMT, while Germany's DAX rose 0.2 percent.

Banks drove the lion's share of gains after the 35 largest U.S. banks cleared the first stage of the Federal Reserve's annual stress test.

U.S. subsidiaries of Deutsche Bank, Credit Suisse and UBS easily met all the minimum capital requirements.

There remained signs of trade war anxiety, however.

Autos stocks extended their losses, down 0.4 percent and the worst-performing sector. They sank on Thursday after Daimler warned profits would be hit by Chinese tariffs on cars imported from the U.S..

The autos sector index was eyeing its worst week since the sell-off at the start of January 2016.

In single-stock moves, BPER Banca led the STOXX, jumping 6.8 percent after Unipol raised its stake in the Italian regional lender.

It helped the Italian banking sector recover some of Thursday's losses as heavyweights Unicredit and Intesa Sanpaolo also rose.

Shares in French state-controlled utility EDF declined 1.8 percent after the head of state holding company APE said France has no intention of splitting up the firm.

(Reporting by Helen Reid, editing by Danilo Masoni)