* FTSEurofirst 300 gains 0.7 pct, banking index up 1 pct
* Banks bounce back on strong financial results
* Spain announces tough austerity measures
* For up-to-the-minute market news, click on []
By Atul Prakash
LONDON, May 12 (Reuters) - European shares bounced back in
morning trade on Wednesday as strong banking results boosted
financial shares, while tough austerity measures announced by
Spain provided some relief to jittery investors.
At 0922 GMT, the FTSEurofirst 300 <> index of top
European shares was up 0.7 percent at 1,042.15 points after
falling to a low of 1,027.41 earlier in the session.
The index dropped 0.4 percent on Tuesday after surging 7.4
percent in the previous session as the European Union and
International Monetary Fund agreed a $1 trillion rescue package
to prevent a euro zone sovereign debt crisis spreading.
Financials were among the top gainers, with sector results
across Europe mostly beating estimates as margins improved,
volumes rose and bad debt provisions fell. []
The STOXX Europe 600 banking index <.SX7P> rose 1 percent,
with French bank Natixis <CNAT.PA> up 3.3 percent after beating
forecasts on Tuesday after markets closed.
Italian banking leader UniCredit <CRDI.MI>, Dutch
bancassurer ING <ING.AS> and Belgian KBC <KBC.BR> rose 2.3 to
5.9 percent after all three also posted results.
German insurer Allianz <ALVG.DE> was up 2.7 percent as it
stuck to its 2010 profit goal. Other gainers included Barclays
<BARC.L>, Lloyds <LLOY.L>, Credit Agricole <CAGR.PA> and
Commerzbank <CBKG.DE>, up 0.2 to 1.9 percent.
"The markets are encouraged by the fact that authorities are
trying to get to grips with the significant fiscal issues they
face on a macro level," said Henk Potts, equity strategist at
Barclays Wealth.
"Investors should continue to be reassured by the bright
pictures being painted by consensus-beating results from the
reporting season."
PUBLIC SPENDING CUT
Spain's Prime Minister Jose Luis Rodriguez Zapatero said the
country will cut public spending by 6 billion euros and civil
service wages will be slashed by 5 percent this year as part of
a drive to meet EU deficit targets. []
The measures aim to reduce the country's budget deficit to 6
percent of gross domestic product in 2011 from 11.2 percent in
2009 as Spain fights to stave off a debt crisis afflicting the
euro zone.
Some analysts, however, advised caution.
"The liquidity crisis has gone but the solvency crisis still
persists," said Koen De Leus, economist at KBC Securities.
"Volatility is going to continue as uncertainty remains and
the details of the EU/IMF deal are yet to be worked out."
Energy shares rose as crude oil prices <CLc1> recovered
after early losses. BG Group <BG.L>, Repsol <REP.MC> and
StatoilHydro <STL.OL> added 0.4 to 0.9 percent.
Among individual stocks, Danish shipping and oil group A.P.
Moller-Maersk <MAERSKb.CO> gained 7.4 percent as it raised 2010
profit guidance after a forecast-beating first quarter driven by
recovering freight rates and higher oil prices.
Deutsche Telekom <DTEGn.DE> was up 2.8 percent. It
reiterated its 2010 outlook after reporting first-quarter
results largely in line with expectations thanks partly to its
German mobile business and operations abroad.
Across Europe, Britain's FTSE 100 index <> was flat.
Conservative Party leader David Cameron took over as British
prime minister and said he planned to form a coalition
government with the smaller Liberal Democratic party.
Germany's DAX <> rose 1.2 percent and France's CAC 40
<> was up 0.5 percent.
(Editing by Hans Peters)
