Europe shares rebound on $1 trillion rescue plan

                                
 * FTSEurofirst 300 up 5.5 pct after sharp sell-off last week
                                
 * Banks up 12 percent; DAX volatility index down 11 pct
                                
 * Commodity shares advance on surge in crude, metals prices
                                
 * For up-to-the-minute market news, click on [STXNEWS/EU]
                                
 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 <.FTEU3> 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 <.SX7P> jumping 12 percent. Allied Irish Banks
<ALBK.I>, Banck Santander <SAN.MC>, Standard Chartered <STAN.L>,
Barclays <BARC.L>, Lloyds <LLOY.L>, Royal Bank of Scotland
<RBS.L>, Societe Generale <SOGN.PA> and Credit Agricole
<CAGR.PA> 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.
[ID:nSGE6490HH]
                                
 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. [ID:nSGE6490HH]
                                
 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 <.V1XI> down 11 percent. The lower the index,
which is based on sell and buy options on Frankfurt's top 30
stocks <0#.GDAXI>, the higher the market's desire to take risk.
                                
 Commodity shares advanced, with crude oil <CLc1> 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 <BLT.L>, Anglo American <AAL.L>,
Antofagasta <ANTO.L>, Rio Tinto <RIO.L>, Xstrata <XTA.L> and
ENRC <ENRC.L> rose 5.8 to 7.9 percent, while oil majors Royal
Dutch Shell <RDSa.L>, Tullow Oil <TLW.L>, Repsol <REP.MC>, Total
<TOTF.PA> and StatoilHydro <STL.OL> added 2.7 to 8.2 percent.
                                
 BP Plc <BP.L> 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 <.FTSE> gained 4.1
percent, Germany's DAX <.GDAXI> rose 4 percent and France's CAC
40 <.FCHI> surged 7.2 percent, but the biggest gains were made
in Spain, Greece, Italy and Portugal, with the IBEX <.IBEX> up
11 percent, the ATG <.ATG> up 9.5 percent, the MIB <.FTMIB> up
8.7 percent and the PSI 20 <.PSI20> 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.
[ID:nLDE6461UP]
  (Additional reporting by Blaise Robinson in Paris; editing by
Karen Foster)