LONDON (MarketWatch) - A strong performance from the banking sector helped European shares to rise again on Tuesday, as better-than-expected earnings from Goldman Sachs went some way to reassuring about second-quarter profit trends.

The pan-European Dow Jones Stoxx 600 index rose 1.3% to 203.43.

The index also climbed on Monday, with banks performing strongly ahead of earnings out this week from several major U.S. lenders.

Goldman Sachs reported a 65% increase in second-quarter profit. See full story.

"For an investment bank, if you can't make money in this environment you might as well shoot yourself because there's been record issuance of the bonds and equities they take commission on," said Oliver Russ, fund manager at Argonaut Asset Management.

Banks with investment banking operations traded higher in Europe. Barclays rose 1.6% and BNP Paribas added 3.1%.

Credit Suisse analysts said that they see more value in Barclays and BNP Paribas than in the rest of the European investment banking sector as they think investors are exercising more caution over second-quarter earnings prospects for these firms, giving greater potential for forecast upgrades.

Meanwhile analysts at Nomura said that they prefer Deutsche Bank , up 2.2%.

"We believe that analyst consensus is most out of line with underlying earnings power," the broker said on Deutsche Bank. They also noted equity derivatives strength in the Goldman Sachs earnings and said that this is supportive for sentiment on French banks. Societe Generale shares climbed 2.7%.

On a regional level, the U.K. FTSE 100 index rose 0.8% to 4,236.22, the German DAX index advanced 1% to 4,770.86 and the French CAC-40 index traded up 0.9% at 3,078.35.

U.S stocks were steady after a strong session on Monday. Asian equity markets ended higher quick guaranteed personal loans. Read more on Asia.

Until this week, stocks had been struggling to make progress against some mixed economic data.

It was a similar story on the data front on Tuesday, as a gauge of German economic expectations slipped unexpectedly in July but industrial production across the 16-nation euro zone saw a 0.5% monthly rise in May and U.S. retail sales rose a better-than-expected 0.6% in June after strong auto and gasoline sales. See full story.

BMW , which exports cars to the U.S., advanced 5.5%.

Mineral extractors were also advancing, as metal futures firmed, with Xstrata shares up 4.9% and Fresnillo shares up 12.3%.

Still, there were some areas of weakness in Europe, with shares of telecom firm Vodafone Group down 2.6% after UBS downgraded the firm to neutral from buy.

The broker said that, given its expectation for poor key performance indicators and cuts to consensus estimates, it was introducing a short-term sell rating.

"Economic pressures, market shares loss and exchange rates have combined to put pressure on our earnings estimates for Vodafone," the broker said. See London Markets.

Q-Cells shares fell 15.7% in Frankfurt.

The solar-cell maker said that it expects to report lower second-quarter revenue and an operating loss after lower sales volumes, postponement of a large scale project and lower solar-cell prices hit results. See full story.

Shares of Software AG declined 5.3% after it said that it plans to take over German peer IDS Scheer . It offered 15 euros a share in a deal worth up to 482 million euros.

IDS shares shot up 38% to 14.93 euros.

Europe Markets: European shares notch second straight day of gains

PARIS &S212; General Motors&S217; plan to sell its European operations to a Canadian auto parts maker and a Russian bank appeared Monday to be in trouble, when another bidder said it was nearing a deal for the unit.

R.H.J. International, a Brussels-listed industrial holding company, said in a statement that it was in talks with G.M. for the acquisition of a majority stake in the European subsidiary, Adam Opel, which includes the operations of Vauxhall in Britain.

&S220;These discussions have been taking place over a number of weeks and are at an advanced stage,&S221; R.H.J. said.

Magna International and Sberbank, a Russian lender controlled by the Kremlin, signed a tentative deal to acquire majority ownership of Opel in late May, just before G.M. sought protection from its creditors in a U.S. bankruptcy court. Magna International and Sberbank, who overcame rival offers from Fiat and from R.H.J., as well as a late expression of interest from Beijing Automotive Industrial Holding, said they hoped to have the outlines of the deal inked in by mid-July.

But those negotiations have been stuck for weeks, amid disagreements over the future of the company and rights to use its technology, and both G.M. and the German authorities have continued to explore their options with rival bidders. Any deal is contingent on government aid, giving Germany a deciding vote fast online cash advance. Berlin has already agreed to provide &S364;1.5 billion, or $2.1 billion, in short-term loans to keep Opel going.

Karin Kirchner, a spokeswoman in Zurich for General Motors, confirmed the companies were holding talks. &S220;We have received proposals from R.H.J. International and Beijing Automotive,&S221; she said, &S220;and we are in discussions with them.&S221; She declined to comment on the status of talks with Magna International.

Analysts have argued that a tie-up with Fiat made the most sense, but the Italian automaker&S217;s desire to streamline and consolidate production raised fears among union and government officials that job cuts would fall heavily on German workers. Fiat has said that it remains interested in a deal but that it will not raise its offer.

Ms. Kirchner declined to comment on G.M.&S217;s communications with Fiat.

As for Beijing Automotive, analysts are skeptical that it has the management skill to pull off a complicated international merger and run a giant European manufacturer.

General Motors emerged from bankruptcy on Friday, after a 40-day restructuring under Chapter 11.

Rival Bidder for G.M.’s Opel Says It Is Close to a Deal

WASHINGTON – A federal jury has rejected a $24 million tax refund claim filed by tobacco company Altria Group Inc.

The IRS challenged tax deductions the Richmond, Va.-based company made in 1996 and 1997 in connection with leveraged lease transactions.

The company claimed the ownership structure of the properties allowed it to take certain tax deductions. The jury did not agree and rejected its claim.

The Justice Department says that taxpayers entered into hundreds of these types of tax shelters in the late 1990s and that billions of dollars may be at stake in disputes over these transactions cash advance now.

Altria said it will seek further review of the verdict against it.

Altria Group is the parent company of Philip Morris USA, the largest US tobacco company.

Federal jury rejects Altria's tax shelter claim

NEW YORK (Reuters) – A group of unsecured creditors objected on Friday to a request by bankrupt Lehman Brothers Holdings Inc (LEHMQ.PK) for more time to draft its reorganization plan, claiming the delay will cut into the &&6;13 billion they say they are owed, according to court documents.

Lehman attorneys asked the court last week to extend until March 15, 2010 the period in which the company can propose a reorganization plan in the largest bankruptcy in U.S. history.

The current deadline expires on Monday and Lehman said it needed time to collect data and coordinate cases that span the globe.

The ad hoc group of unsecured creditors -- including Elliott Management Corp, King Street Capital Management LP and Paulson & Co Inc -- argued in the documents, filed in federal bankruptcy court in Manhattan, that Lehman is essentially being liquidated and therefore creditors should manage the process since they are the main beneficiaries.

"Neither the managers of the enterprise, nor the Debtors&&9; advisors ... are economically motivated to create value for the enterprise," they said in the filing. "In contrast, the true stakeholders -- the creditors -- are effectively disfranchised and impaired cash advances."

The group also criticized Lehman&&9;s disclosure practices, saying Lehman&&9;s "Monthly Operating Report" for June 2009 was one line long.

Lehman filed for bankruptcy in September 2008 as confidence evaporated from financial markets.

The committee&&9;s filing also criticized a fee structure that it says encourages restructuring advisers, Alvarez & Marsal, to drag out the time it spends managing Lehman. Alvarez & Marsal has so far earned fees of about &&6;115 million.

Including the fees paid to Alvarez & Marsal, Lehman paid a total of &&6;262.6 million in legal and consulting fees between September 2008 and June.

Lehman Brothers attorneys did not return calls seeking comment.

The case is In re Lehman Brothers Holding Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.

(Reporting by Tom Hals and Phil Wahba; editing by Andre Grenon)

Creditors oppose extending Lehman plan deadline

SHANGHAI &<51; The buying and selling of the make-believe currencies used in online gaming has become so widespread that Chinese authorities fear it will affect the real economy.

To quell that threat, those authorities said on Tuesday that they had issued new regulations aimed at restricting the trade and use of virtual money.

China is one of the world&S217;s biggest markets for huge so-called multiplayer online games like World of Warcraft, and tens of millions of young people are believed to be trading virtual goods and credits for real goods and cash.

The coin of fantasy realms have already moved markets here. So-called QQ coins &<51; a form of currency produced by the Chinese Internet giant Tencent &<51; have sometimes risen sharply in value against China&S217;s official currency, the renminbi, alarming officials at the nation&S217;s Central Bank.

Some people have even traded virtual currencies in China, and exchanged them for clothes, cosmetics and other goods.

Last year, nearly $2 billion in virtual currency was traded in China, according to the China Internet Network Information Center. Some experts say they believe there is a much larger underground economy in the virtual world.

Most of China&S217;s big Internet companies &<51; like Sohu.com, Netease and Tencent &<51; have some gaming component and virtual currencies have grown up alongside many of them.

Some smaller gaming companies have even set up what are called virtual sweatshops, cramped quarters where young people play online games to earn credits that the companies then sell at a profit to overseas customers in Taiwan, South Korea and even the United States.

This practice is popularly known in the online gaming community as gold farming.

Many online marketplaces, like eBay and China&S217;s Taobao, even have online advertisements offering virtual goods for sale, like World of Warcraft gold coins and virtual swords for the game Legend of Swordmen.

Edward Castronova, a professor of telecommunications at Indiana University Bloomington who says he believes virtual currencies could pose a threat to world economies, applauded Beijing&S217;s move.

&S220;This action shows that at least one government is concerned about the way virtual worlds challenge its control of society,&S221; Professor Castronova said in an e-mail message Tuesday. &S220;As virtual currencies take over more and more purchasing power, control over the effective money supply shifts from the central bank to the game developers."

On Tuesday, China said that new regulations would restrict the trading and use of virtual money, and that virtual currencies would be banned from being exchanged for goods.

The government also said it was moving to fight online gambling and disputes over virtual coins.

In a release, Beijing said that while virtual currencies had helped promote online gaming, they have &S220;also brought new economic and social problems.&S221;

Beijing has repeatedly sought to tame the online gaming market with new regulations (and even Internet addiction camps) but the activity continues to grow.

The new rules, issued jointly last weekend by the Ministry of Commerce and the Ministry of Culture in Beijing, are the government&S217;s strongest effort yet to tame virtual money.

The regulations were widely circulated just as Beijing announced it would delay adoption of a widely criticized plan to install software that was supposed to censor pornographic and other &S220;unhealthy&S221; Web sites in all personal computers sold in China.

Richard Ji, an Internet analyst at Morgan Stanley, released a brief report Tuesday saying he expected only limited financial impact on Chinese gaming companies because much of the trading in virtual currencies and goods does not occur on the sites of big, publicly listed gaming companies, he says; it occurs on other Web sites.

In China, New Limits On Virtual Currency

CHICAGO (MarketWatch) -- The volume of mortgage applications filed last week dropped a seasonally adjusted 18.9% from the week before, as refinancing activity plunged, the Mortgage Bankers Association reported Wednesday.

Applications for mortgages to refinance existing home loans fell 30% for the week ended June 26 -- putting the MBA survey's refinance index at its lowest level since November.

Meanwhile, the week-to-week pace of applications filed for mortgages to purchase homes was down a seasonally adjusted 4.5%.

In the week ended June 19, overall applications activity rose a seasonally adjusted 6.6% from the prior week, the MBA's data showed. The survey done by the Washington-based MBA covers about half of all U.S. retail residential mortgage applications. See full story.

Compared with the same week in 2008, total applications for the latest week were down an unadjusted 7.4%. The four-week moving average for all mortgages was also down, off a seasonally adjusted 9.2%.

Application volumes fell even as the interest rates charged on mortgages dropped.

According to the MBA, 30-year fixed-rate mortgages carried an average rate of 5.34% last week, down from 5.44% the week before.

To obtain the rate, the 30-year mortgage required payment of an average 1.12 point. A point is 1% of the mortgage amount, charged as prepaid interest.

Fifteen-year fixed-rate mortgages averaged 4.81%, down from 4.93% the week before; the rate required payment of an average 1.04 point.

And the average rate on one-year adjustable-rate mortgages eased to 6.52%, down from 6.54% the week before; the rate required payment of an average 0.13 point.

Refinancings made up 46.4% of all applications last week, down from 54% the week before. ARM applications accounted for 4.3%, up from 4.1%.

Week-to-week mortgage applications off 18.9%: MBA