LONDON (Reuters) - European shares edged upwards on Thursday, hugging three-year highs, supported by expectations of lower interest rates.

Global bank HSBC led the way after its affiliate, China's Bank of Communications, rose in Hong Kong on its first day of trading.

Oil prices also rose after a two-day retreat, staying within sight of $60 a barrel, but traders said their relatively lower levels should support equities.

"U.S. light crude has traded as low as $58 a barrel overnight and although there's been an upward reversion in recent trade, these lower prices should offer support for equities across the board in early trade," said Matt Buckland, a trader at CMC Group.

"However, the likes of Shell and BP can expect to find themselves under a degree of pressure."

The DJ Stoxx oil & gas index was the weakest sector in the market. BP fell 0.6 percent.

At 0710 GMT, the FTSEurofirst 300 index was 0.16 percent higher at 1,148.3 points.

Expectations that interest rates would decline were fueled by minutes from the Bank of England Monetary Policy Committee meeting in June, which showed two of the nine members who kept rates at 4.75 percent for the 10th month running voted for a cut as a consumer slowdown bites.

BT rose 1.4 percent after it agreed to open up its network to rivals and announced several cuts in wholesale prices in exchange for lighter regulation.

Infineon was 2.6 percent higher after the Handelsblatt newspaper reported the German chipmaker is considering an initial public offering of shares in its memory chip division but has yet to take a formal decision.

Tate & Lyle fell 3.4 percent after the British sugar and sweetener group urged the European Commission to change what it termed inequitable treatment of sugar cane refiners compared to beet processors under new EU proposals.

The group, Europe's biggest can sugar refiner, said the effect of the proposals unveiled on Wednesday would be to cut sugar beet refining margins by 20-22 percent but reduce sugar cane margins by 50-55 percent.

On the economic data front, U.S. weekly jobless claims are due at 1230 GMT while U.S. data on new home sales for May, due at 1400 GMT, is seen coming just off April's record high.