Crude fall lifts Europe shares; euro boosts autos

* FTSEurofirst 300 up 0.7 percent

* Airlines, autos gain as oil, euro fall

* Miners and oil stocks limit index's advance

By Joanne Frearson

LONDON, Sept 2 (Reuters) - European shares rose early on Tuesday as a sharp fall in the oil price took the edge off inflation concerns and lifted airlines and travel stocks, while autos gained from a weakening euro.

At 0845 GMT, the FTSEurofirst 300 index of top European shares was 0.7 percent higher at 1,198.16, recovering from a low of 1,182.72 points.

Oil CLc1 sank nearly $9.50 a barrel to around $106, hitting its lowest since early April on initial signs that a weakened Hurricane Gustav spared major Gulf oil facilities.

BP , Total , StatoilHydro and Royal Dutch Shell fell between 1 and 2.4 percent.

"There is no real reason why the oil price should go up with Hurricane Gustav weakening. The market should be led by further weakness in the commodity price," said Justin Urquhart Stewart, director at Seven Investment Management.


Airline stocks gained on the lower oil price, with Lufthansa up 3 percent, British Airways up 5.2 percent and Air France KLM up 3 percent.

Travel operators were also helped by the lower oil price, Thomas Cook Group and Carnival CCCL.L both up over 5 percent.

Automobiles notched up strong gains, benefiting from a weaker euro. German car maker Daimler ticked up 4.3 percent, while peer BMW rose 5 percent, and France's Renault edged up 4.2 percent.

German exchange operator Deutsche Boerse rose 3.8 percent after its two biggest shareholders said they would work together to explore all options for shareholder value creation.

In the UK banking sector, Barclays was up 3 percent on reports the group is in talks to sell 50 percent of its Spanish insurance and pension business.

Across Europe, Britain's FTSE .FTSE rose 0.4 percent, Germany's DAX .GDAXI gained 1.1 percent, and France's CAC .FCHI rose 0.9 percent.

TOO MANY BANKS?

Germany's Commerzbank was down 2.8 percent as UBS cut its price target to 19.5 euros from 22 euros. The bank is buying rival Dresdner, a unit of insurer Allianz , for $14.5 billion.

"In Europe, there is still concern over the German banking sector and how much more rationalisation is needed. There are too many banks and not enough business and little reason to be positive," said Stewart.

Sticking with the downside, Alcatel-Lucent fell 1 percent after the world's top provider of fixed-line telecoms networks named a new management team.

Energy stocks fell sharply, with BP , StatOilHydro and Total down 1.9-4 percent, while miners also declined.

Rio Tinto was among the heaviest drags on the index, with a fall of 4 percent. (Reporting by Joanne Frearson, editing by Will Waterman)