UPDATE 2-Santander buoys European shares but coronavirus fears persist

(For a live blog on European stocks, type LIVE/ in an Eikon
news window)
* Bank stocks gain after Santander results
* China economist warns on growth outlook
* German 2020 GDP forecast raised, but 2021 lowered
* FTSE 100 underperforms as oil majors lag
* Federal Reserve interest rate decision on deck

(Updates to close)
By Susan Mathew and Medha Singh
Jan 29 (Reuters) - Banco Santander and Safran ensured
European shares ended higher on Wednesday, even as investors
weighed the potential impact of the fast-spreading coronavirus
and an economist's prediction on the world No. 2 economy further
dampened sentiment.
Spain's IBEX .IBEX led regional bourses, lifted by a 4.4%
rise in Santander SAN.MC after the lender posted a higher
quarterly net profit, boosted by solid underlying performance in
its main market Brazil and capital gains. Along with a rally in Swedish banking group SEB SEBa.ST ,
which topped fourth-quarter earnings, the euro zone banks index
.SX7E climbed 1%. Boeing BA.N supplier Safran SAF.PA was also a major
boost to the pan-region index after the planemaker's shares rose
despite a surprise annual loss with analysts saying much of the
bad news had been priced in.
After a recovery day on Tuesday, the pan-European STOXX 600
.STOXX and most major country indexes traded not more than
half a percent higher as sentiment still remained subdued on
worries over the economic damage from the flu-like virus that
originated in China. The STOXX 600 shed nearly 3% on Monday as outbreak fears
gripped markets. The virus has claimed 133 lives so far and
infected more than 5,000 people in China, prompting a Chinese
government economist to warn that the country's economic growth
may drop to 5% or even lower.
"You've got the tension between what investors would like to
do - keep pouring into equities, there is a great appetite to
keep pushing these indices higher - but there keeps being these
big global problems that keep forcing investors to have to
question and justify a rebound when there is no reason to do
so," said Connor Campbell, analyst at British financial spread
better Spreadex.
German shares .GDAXI lagged regional peers, closing up
0.2% after dipping into the red during the session. China is
Germany's most important trading partner.
Germany's economy minister raised the economic growth
outlook for the country but cut expectations for
2021. British shares .FTSE closed flat as a slip in oil prices
weighed on oil majors. O/R .L
LVMH LVMH.PA , Louis Vuitton owner, was one of the biggest
drags on the STOXX 600 as slowing sales growth in the fourth
quarter dented shares. Luxury stocks, which derive a chunk of
their demand from China, had attempted a recovery on Tuesday.

Investor attention now turns to central bank meetings from
around the world. The U.S. Federal Reserve is almost certain to
keep interest rates on hold at the end of a two-day policy
meeting later in the day, while expectations of a rate cut by
the Bank of England on Thursday stand at 50%. BOEWATCH
Friday will mark the UK's official departure from the
European Union.