* FTSEurofirst 300 index gains 0.4 percent, led by banks
* ECB raises rates, BoE holds, both as expected
* Portuguese bank stocks rise after country seeks bail out
* For up-to-the-minute market news, click on
By Brian Gorman
LONDON, April 7 (Reuters) - Banks led European shares to their highest level in nearly a month on Thursday as strategists said interest rate rises would not derail equities' advance and a bailout for Portugal would give stability.
The European Central Bank raised its key interest rate by 25 basis points to 1.25 percent, tightening policy as expected to counter firming price pressures in the euro zone.
"Many investors believe that today is not only the day that the ECB is hiking its rates, but also the beginning of a whole line of rate hikes this year," said Markus Huber, senior Trader at ETX Capital.
"In countries like Germany, where the economy is growing strongly, a rate hike is likely to only have a moderate impact. In contrast, countries like Portugal are likely to feel a strong impact."
Attention will now switch to the ECB press conference where investors will look for hints on further tightening.
The Bank of England earlier kept interest rates at a record low of 0.5 percent, also as expected.
At 1127 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.4 percent at 1,152.01 points and had hit 1,153.04, the highest in nearly a month.
Banking stocks were among the best performers, with the STOXX Europe 600 Banks index gaining 1.8 percent.
Portugal's Millennium bcp, Banco Espirito Santo and BPI gained between 4.2 and 5.3 percent after Portugal requested financial aid from the European Union, outperforming the country's PSI 20 index, which was 1.3 percent higher.
Other banks to rise included BNP Paribas, Banco Santander and Credit Suisse, up between 2.5 and 3.4 percent.
The fall of another euro zone domino after Greece and Ireland focused attention on Madrid, though analysts say Spain's financial position is improving.
Spain vowed on Thursday it would not follow ailing neighbour Portugal in seeking a European bailout. A successful Spanish bond auction suggested markets do not immediately fear contagion.
Strategist remained upbeat on equities.
"It's all heading in the right direction. The debt markets are stable on the back of the Portuguese bailout. I think that's a pretty good result," said Dean Tenerelli, fund manager at T Rowe Price, which manages $440 billion.
"And the news yesterday on the capital raising for the financials (Commerzbank and Intesa Sanpaolo) reassures the market that Europe is dealing with the banks."
He added that investors would not be troubled by the ECB raising rates, and were already expecting further rises. "The markets are not pricing in rates at 1.25 percent going forward. As long as the increases are slow and steady, that's fine for equities." (Additional reporting by Josie Cox; Editing by David Cowell)