By Anisha Sircar

(Reuters) -European shares rose on Tuesday following a two-day slump as banking stocks boosted bourses on the back of higher interest rate expectations, though fears around a burgeoning energy crisis and looming recession kept gains in check.

The pan-European STOXX 600 rose 1.0%, after a sell-off of about 2.5% over the last two sessions, driven by a hawkish tone struck by European Central Bank (ECB) speakers and U.S. Federal Reserve Chair Jerome Powell, which bumped up rate expectations.

Bank stocks, which tend to benefit from higher interest rate environments, rose 2.2% after traders priced in more than a two-thirds chance of a 75-basis-point move at the ECB’s September 8 policy meeting. [ECBWATCH]

A number of ECB officials spoke in favour of rate hikes, but what matters more is whether markets have confidence in the ECB to significantly tighten despite all adversities,” said Commerzbank analyst Esther Reichelt.

With a view to the coming winter and the threat of an energy crisis, investors are likely to remain understandably cautious,” Reichelt added.

A planned three-day halt of natural gas supplies to Europe by Russian energy giant Gazprom via the Nord Stream 1 pipeline was set to kick off on Wednesday.

On Monday, ahead of the halt, German economy minister Robert Habeck said the country faces the “bitter reality” that Russia will not restore gas supplies to Germany. Separately, several Italian papers reported on Tuesday Berlin was willing to consider a price-cap on gas.

The DAX rose 1.6% to move away from six-week lows.

Meanwhile, Spain’s IBEX rose 1.1%. Spanish national consumer prices rose 10.4% year-on-year in August, down from 10.8% the previous month, preliminary data showed.

Among individual stocks, shares in Sanofi firmed 1.0% after a drug which the firm as well as Sweden’s SOBI are collaborating on was granted priority review by the U.S. Food and Drug Administration. SOBI also added 1.0%.

Gazprom has informed Engie it is reducing its gas deliveries starting Tuesday due to a disagreement between the parties, the French utility said. Engie shares added 1.1% in early trade.

Adevinta surged 14.1% after the world’s largest classified ads company reported upbeat quarterly results.

Norway’s Aker Solutions jumped 5.5% after the firm announced it would form a subsea engineering joint venture with Schlumberger.

(Reporting by Anisha Sircar in Bengaluru; Editing by Krishna Chandra Eluri)