By Blaise Robinson
PARIS, Jan 24 (Reuters) - European stocks surged in early
trade on Thursday, tracking a Wall Street recovery on hopes that
a rescue for troubled bond insurers could prevent more
writedowns, while investors digested the announcement of a huge
fraud at Societe Generale <SOGN.PA>.
Shares were suspended in in the French bank, which unveiled
the fraud by one of its traders with a 4.9-billion-euro ($7.16
billion) negative impact on the group.
At 0858 GMT, the FTSEurofirst 300 <> index of top
European shares was up 4 percent at 1,313.14 points, after
losing 3.2 percent on Wednesday.
Tech shares were among the biggest gainers, with Nokia
<NOK1V.HE>, the world's top cellphone maker, up 8.7 percent.
Banks and insurers were also among the leaders, with Banco
Santander <SAN.MC> up 6.3 percent, AXA <AXAF.PA> up 8.3 percent
and UBS <UBSN.VX> up 5.3 percent.
SocGen rival BNP Paribas <BNPP.PA>, which said it saw no
exceptional loss or item in its 2007 accounts which would
justify a warning, gained 6.5 percent.
The Dow Jones industrial average gained 2.5 percent on
Wednesday as news of a meeting between New York regulators, bond
insurers and their customers lifted the market out of negative
territory in late afternoon.
"The key story here is the bond insurers story," said Edmund
Shing, strategist at BNP Paribas in Paris.
"It would be logical that U.S. and European banks would
coordinate with regulators in the United States to help bail out
these insurers, because if these guys would fail, it would be
much more catastrophic for banks' balance sheets and we would
see another round of write-downs."
Shares in European financial institutions started to fall
sharply last Friday after U.S. bond insurer Ambac <ABK.N> lost
its vital triple-A credit rating from Fitch Ratings, putting at
risk billions of dollars of corporate and municipal bonds
covered by the company.
"Right now, we're obsessed by this (monoline insurers).
We've been through it already with other markets, ABCP, CDOs,
the interbank markets, this is the next one," said Calyon rate
strategist David Keeble.
New York's insurance regulator pressed major banks on
Wednesday to put up billions of dollars to support ailing bond
insurers and prevent investors from being forced to sell
billions of dollars of bonds the insurers had covered.
The two largest U.S. bond insurers, Ambac Financial Group
Inc <ABK.N> and MBIA Inc <MBI.N>, guarantee more than $1
trillion of securities, while the industry as a whole guarantees
more than $2 trillion.
If the insurers lose their top ratings, investors that can
only hold bonds with top ratings may be forced to sell their
holdings, dumping billions of dollars of municipal bonds and
repackaged loans into the market.
STARTING TROUBLE
Europe's FTSEurofirst 300 is still down 13 percent so far in
January, hit by worries over the prospect of a U.S. recession
and fears that financial institutions have not yet revealed the
full impact of the problems sparked by the U.S. subprime
mortgage market on their books.
The index is down 19.6 percent from its 52-week high. Many
analysts consider a fall of 20 percent from a peak as signalling
a bear market.
Among standout gainers, Pernod Ricard <PERP.PA> soared 9
percent after the French wines and spirits group reported a 9.1
percent rise in second-quarter like-for-like sales that beat
expectations and raised its guidance for full year operating
profit.
But brewer Scottish & Newcastle <SCTN.L> slipped 3.4 percent
on market concern that a consortium of Heineken <HEIN.AS> and
Carlsberg <CARLb.CO> would not make a formal bid by the midday
deadline.
Around Europe, Germany's DAX index <> was up 4.9
percent, UK's FTSE 100 index <> up 3.4 percent and France's
CAC 40 <> up 4.9 percent.
(Additional reporting by Kirsten Donovan in London; Editing by
Quentin Bryar)
