By Sitaraman Shankar
LONDON, Feb 25 (Reuters) - European shares rose sharply
early on Monday, with banks gaining on acquisition talk and the
broad market buoyed by hopes for a rescue package for a U.S.
bond insurer that would limit damage from a credit crisis.
At 0917 GMT, the FTSEurofirst 300 <> index of top
European shares was up 1.6 percent at 1,341.11 points, with
banks contributing more than a quarter of the index's gains.
Newspaper reports of Qatari interest in building a stake in
Royal Bank of Scotland <RBS.L> sent the stock 6.6 percent
higher, and Alliance & Leicester <ALLL.L> and Bradford & Bingley
<BB.L> gained more than 6 percent on talk that Lloyds TSB
<LLOY.L> could be weighing a bid for one of the groups.
Lloyds TSB declined to comment.
Other banks also gained, with HSBC <HSBA.L> rising 2.3
percent, ING <ING.AS> 3.4 percent, Barclays <BARC.L> 2.9 percent
and UBS <UBSN.VX> 2.9 percent.
The sector was also lifted by comments from Qatar's prime
minister, who heads the country's $60 billion sovereign wealth
fund, that he favoured investing in European over U.S. lenders.
On Friday, a source familiar with the matter said a rescue
for bond insurer Ambac Financial Group <ABK.N> could be
announced early this week. Talks with the banks including
Citigroup <C.N>, UBS <UBSN.VX> and Wachovia <WB.N> were
advancing, the source said.
"It's going to be a good start to the week, with news on the
bond insurers, the Chinese sovereign wealth fund and that Qatar
might be buying into RBS," said Justin Urquhart Stewart at 7
Investment Management.
"But none of the underlying worries about the economy have
gone away. More people are looking at bank shares, which are
heavily discounted, but there's more bad news to come: a
weakening economy, less lending and a market that's shrunk
overall."
He added that this could lead to mergers and acquisitions in
the sector.
"There's going to be more blood on the carpet, and we'll see
consolidation of some of the smaller players."
Across the region, Britain's FTSE 100 <> gained 1.7
percent, Germany's DAX <> rose 1.1 percent, and France's
CAC <> rose 1.6 percent.
A MUCH BETTER MONTH
The FTSEurofirst 300 has gained 0.7 percent in February,
while it tumbled nearly 12 percent last month.
The gains in February have been largely the result of two
U.S. rate cuts late in January, and broadly strong corporate
results for Europe's top companies.
Swiss drugmaker Roche <ROG.VX> jumped 3.8 percent after the
unexpected U.S. approval of its key Avastin drug for the
treatment of advanced breast cancer, a positive surprise after
an earlier negative drug opinion.
Oil stocks rose as crude prices inched back towards $100 a
barrel, with BP <BP.L>, Royal Dutch Shell <RDSa.L> and Total
<TOTF.PA> all up about 2 percent.
Among other notable gainers, British property firm Hammerson
Plc <HMSO.L> jumped 7 percent after releasing strong 2007
results.
(Reporting by Sitaraman Shankar, editing by Will Waterman)
