* FTSEurofirst 300 index close up 0.5 percent
* Commodity stocks gain tracking crude, metals
* Roche up on positive Phase II data
By Joanne Frearson
LONDON, Sept 22 (Reuters) - European shares closed higher on Tuesday, snapping a two-day losing streak as a stronger commodity sector tracked firmer crude and metals prices that were supported by a weaker dollar.
The pan-European FTSEurofirst 300 index of top shares closed up 0.5 percent at 1,004.41 points. The European index has rallied nearly 56 percent since hitting a low in March and is up around 18 percent this quarter, on track to post its best quarterly rise in almost a decade.
"A fairly positive tone to the day. I think it is a general notion that the recession is over and the economy is only going to improve from here," said Peter Dixon, economist at Commerzbank.
U.S. Treasury Secretary Timothy Geithner said the U.S. economy appeared to be gathering steam and G20 leaders meeting in Pittsburgh this week would strive to ensure the recovery was balanced. "But there is a growing sense we are getting a bit ahead of ourselves. We have had a pause in recent days ... and I expect the trend over the next few days is going to be flat," Dixon said.
Energy stocks added most points to the index as oil rose above $71 a barrel, recovering from a sharp fall the previous day. BP, Royal Dutch Shell and Total were 0.7 to 0.9 percent higher. Miners tracked metals prices higher, with copper and nickel up 1.6 and 3.9 percent, respectively. Eurasian Natural Resources Corporation, Rio Tinto and Xstrata rose between 1.1 to 4.4 percent.
DRUGMAKERS IN DEMAND
Drugmakers, which have lagged behind the rally and offer relatively higher and steadier yields, were also in demand.
Roche gained 1.4 percent after Phase II data showed that Avastin, which has already been shown to help patients with brain cancer stay alive longer without their condition worsening, may also improve their daily lives.
Banks found favour, with Credit Suisse gaining nearly 3 percent. The Swiss group is confident it can keep private banking margins between 110 to 120 basis points over the long term and expects average annual net new money growth of 6 percent.
Banco Santander, Credit Agricole and Deutsche Bank were up 0.7 to 1.7 percent. Looking ahead, investors will look closely at the outcome of the two-day Federal Reserve policy meeting which ends on Wednesday. Economists expect the FOMC to hold the target range for interest rates steady at zero to 0.25 percent.
With steering the global economy out of recession the key focus for the G20 leaders meeting in Pittsburgh on Thursday and Friday, markets will be looking for any comment indicating the Fed might wind back its stimulus measures given improving macroeconomic data.
"The issue of "exit strategies" is likely to remain key for policymakers globally, at this week's G20 summit and beyond. It is the outlook for subdued inflation that gives the necessary breathing space for policy support to be withdrawn cautiously," Barclays Wealth said in a note.
Across Europe, Britain's FTSE 100 advanced 0.2 percent, Germany's DAX rose 0.7 percent and France's CAC 40 put on 0.3 percent.
(Additional reporting by Dominic Lau; editing by John Stonestreet)