×

Europe shares rebound on $1 trillion rescue plan

By Atul Prakash LONDON, May 10 (Reuters) - European shares spiked on Monday after their worst weekly drop in nearly 18 months, with a $1 trillion rescue package to stabilise the euro agreed by global policymakers boosting investor sentiment. At 0901 GMT, the FTSEurofirst 300 index of top European shares was up 5.5 percent at 1,021.00 points -- the biggest daily percentage gain in 17 months and bouncing back after hitting a seven-month closing low on Friday. It fell 8.9 percent last week, its worst weekly performance since November 2008. Financial stocks were the top gainers, with the STOXX Europe 600 banking index jumping 12 percent. Allied Irish Banks , Banck Santander, Standard Chartered, Barclays, Lloyds, Royal Bank of Scotland , Societe Generale and Credit Agricole surged 9.6 to 26.7 percent. "The EU has taken a decisive action to stamp out the speculative attack against the euro and this should be sufficient to bring some calm into the market," said Klaus Wiener, head of research at Generali Investments. "What has been done is sensible. It has sent a very strong message to the market that the euro will not be allowed to fail." The rescue package was hammered out by European Union finance ministers, central bankers and the International Monetary Fund in marathon weekend talks to resolve the Greek debt crisis, which have threatened to sink the euro and unravel euro-zone unity. It is the largest bailout since Group of 20 (G20) leaders threw money at the global economy more than two years ago, following the collapse of Lehman Brothers. The massive package of standby funds, loan guarantees, liquidity measures and central bank bond purchases surprised financial analysts and the euro rose some 2 percent, euro zone government bond futures fell and European credit derivatives rallied sharply. In concerted action, the U.S. Federal Reserve reopened currency swap lines with several central banks to try to assure markets of dollar liquidity and the European Central Bank said it would buy government debt to steady investor nerves. Group of Seven and G20 finance ministers offered their backing of the measures. Despite the general positive reaction, some analysts advised caution. "This is not a solution, it is a shuffling of the cards, concentrating debt on the strongest nations. Without radical budget restructuring, the problem will not go away," MF Global analyst Simon Maughan said. RISK APPETITE RISES Investor appetite for risky assets jumped, with the VDAX-NEW volatility index down 11 percent. The lower the index, which is based on sell and buy options on Frankfurt's top 30 stocks, the higher the market's desire to take risk. Commodity shares advanced, with crude oil rebounding from its lowest level in almost three months on expectations that the massive EU rescue package will help energy demand to recover. Key base metals prices jumped 2.8 to 3.5 percent. Miners BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and ENRC rose 5.8 to 7.9 percent, while oil majors Royal Dutch Shell, Tullow Oil, Repsol, Total and StatoilHydro added 2.7 to 8.2 percent. BP Plc fell 0.9 percent. The company was considering its next move after its most promising short-term remedy for a massive undersea oil spill in the Gulf of Mexico had to be suspended over the weekend, fuelling fears of a prolonged and growing environmental and economic disaster. In the first 90 minutes of trading, about 200 million shares changed hands on the FTSEurofirst 300, representing around 77 percent of its 90-day daily average volume. The average daily volume in 2009 was 253 million shares. Across Europe, Britain's FTSE 100 index gained 4.1 percent, Germany's DAX rose 4 percent and France's CAC 40 surged 7.2 percent, but the biggest gains were made in Spain, Greece, Italy and Portugal, with the IBEX up 11 percent, the ATG up 9.5 percent, the MIB up 8.7 percent and the PSI 20 up 8.8 percent. Also on investors' radar screens on Monday, the Bank of England is expected to leave interest rates at 0.5 percent and not to undertake further quantitative easing purchases when it concludes its Monetary Policy Committee meeting on Monday. (Additional reporting by Blaise Robinson in Paris; editing by Karen Foster) Keywords: MARKETS EUROPE STOCKS ============================================================= For rolling updates on what is moving European shares please click on ============================================================= For pan-Europeanmarket data and news, click on codes in brackets: European Equities speed guide................... FTSEurofirst 300 index.............................. DJ STOXX index...................................... Top 10 STOXX sectors........................... Top 10 EUROSTOXX sectors...................... Top 10 Eurofirst 300 sectors................... Top 25 European pct gainers....................... Top 25 European pct losers........................ Main stock markets: Dow Jones............... Wall Street report ..... Nikkei 225............. Tokyo report............ FTSE 100............... London report........... Xetra DAX............. Frankfurt market stories CAC-40................. Paris market stories... World Indices...................................... Reuters survey of world bourse outlook.......... Western European IPO diary........................... European Asset Allocation......................... Reuters News at a Glance: Equities............... Main currency report:............................... Keywords: MARKETS EUROPE STOCKS/ =2 (atul.prakash@reuters.com; +44 20 7542 6189; Reuters Messaging: atul.prakash.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.