Europe stocks snap losing streak on bailout hopes

                                
 * FTSEurofirst 300 rises 2.2 pct, snapping 3-day losing run
                                
 * Banking stocks lead rally on hopes over U.S. bailout plan
                                
 * Fortis tumbles on funding fears
                                
 
                                
 By Blaise Robinson
                                
 PARIS, Sept 25 (Reuters) - European stocks ended sharply
higher on Thursday, rising for the first time in four sessions
as renewed optimism over a U.S. bank rescue plan eclipsed weak
economic data and a profit warning by General Electric <GE.N>.
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
closed 2.2 percent higher at 1,125.46 points.
                                
 U.S. lawmakers were getting close to an agreement on the
$700 billion bailout plan on Thursday with more protections for
taxpayers, fuelling hopes that a bipartisan consensus on the
plan to rescue the embattled financial sector could be reached
in time for a meeting at the White House later in the day.
                                
 Banking stocks were among the biggest gainers, with Credit
Agricole <CAGR.PA> gaining 6.5 percent and Royal Bank of
Scotland <RBS.L> adding 5 percent. UBS <UBSN.VX> soared 5.1
percent, also buoyed by speculation that HSBC <HSBA.L> could bid
for the Swiss lender. Both UBS and HSBC declined to comment.
                                
 "The very low treasury yields, the huge spike in equity
volatility and the current spreads... that is all indicating a
very high level of risk aversion," said Arthur van Slooten,
strategist at Societe Generale, pointing out it could be a sign
that the bottom of the market has been reached.
                                
 "We still don't have the hard details about the rescue plan,
but if they manage to get a package of this size in just two
weeks, that would be an absolute record. Now it all depends on
that going through before being able to call it the bottom of
the market."
                                
 Bucking the trend in the financial sector, Fortis
<FOR.BR><FOR.AS> ended 6.3 percent lower after losing as much as
20 percent in intraday trading, hit by persistent worries over
its funding, several traders said. A spokeswoman for Fortis
denied market talk the Dutch Central Bank had asked Rabobank
[RABN.UL] to support Fortis with liquidity.
                                
 Insurers were also on the upside, with Munich Re <MUVGn.DE>
gaining 4.4 percent, pushed higher by talk that U.S. investor
Warren Buffett and Swedish investor Cevian were upping their
stakes in the reinsurer.
                                
 "We never comment on market rumours. We always said that we
welcome every interest in our shares," a Munich Re spokesman
said.
                                
 
                                
 BLEAK U.S. DATA
                                
 But Thursday's rebound was reined in by General Electric's
profit warning as well as bleak U.S. macroeconomic data.
                                
 The U.S. industrial conglomerate slashed its earnings
forecast, saying the crisis in global credit markets could drive
its profit down as much as 12 percent.
                                
 "It's not that surprising. The economy is clearly slowing,
so it's normal to see GE, heavily involved in the economy as a
whole, warning on its outlook," said Philippe Gijsels, senior
equity strategist at Fortis Bank, in Brussels.
                                
 "I fear that there will be more of the same in the
industrial sector in a not too distant future."
                                
 Adding to worries over the health of the U.S. economy, data
showed sales of newly constructed U.S. single-family homes in
August fell to their lowest point in more than 17 years while
prices hit four-year lows.
                                
 New orders for long-lasting manufactured goods dropped by a
sharper-than-expected 4.5 percent in August as demand for
transportation equipment and many other costly items sank.
                                
 The FTSEurofirst 300 is down 25 percent so far in 2008,
hammered by fears over the impact of the crisis in the credit
market that has forced banks to unveil massive asset writedowns
and prompted Wall Street investment bank Lehman Brothers
<LEHMQ.PK> to file for bankruptcy protection.
                                
 The benchmark index rallied strongly last week on news
Washington was working on a plan to purge banks' balance sheets
from bad mortgage-related debt.
                                
 Around Europe on Thursday, UK's FTSE 100 index <.FTSE> rose
2 percent, Germany's DAX index <.GDAXI> added 2 percent and
France's CAC 40 <.FCHI> gained 2.7 percent.
                                
 Swedish truck maker Scania <SCVb.ST>, majority-controlled by
Germany's Volkswagen <VOWG.DE>, surged 12 percent, on renewed
bid rumours. Last year, the company fended off a bid by German
rival MAN <MANg.DE>. Scania officials were not immediately
available for comment.
 (Editing by Sue Thomas)