By Rebekah Curtis
LONDON, July 14 (Reuters) - European stocks rose sharply
early on Monday, boosted by a U.S. plan to rescue embattled
mortgage finance companies Fannie Mae <FNM.N> and Freddie Mac
<FRE.N> and by a fresh wave of takeover activity.
Fannie Mae <FNM.F> and Freddie Mac <FRE.F> jumped 16 and 22
percent respectively in Frankfurt after the U.S. Treasury and
Federal Reserve plan called for sweeping measures to lend money
and buy equity if needed in the government-sponsored
enterprises.
Acquisition activity boosted stock in auto parts maker
Continental <CONG.DE>, Dutch mail company TNT <TNT.AS>, British
bank Alliance & Leicester <ALLL.L> and Belgian brewer InBev
<INTB.BR>.
At 0835 GMT the pan-European FTSEurofirst 300 index <>
was up 1.3 percent at 1,141.11 points. The index slid 2.6
percent on Friday to hit its lowest close in more than three
years as banks sank on worries about Freddie Mac and Fannie Mae.
Stock in the two groups plummeted more than 40 percent last
week on growing fears that the companies, pillars of the U.S.
housing market, were undercapitalised.
"The U.S. authorities are doing everything they can to prop
up the financial system...It's good news in an unremitting cycle
of gloom," said Peter Dixon, an economist at Commerzbank in
London.
"I don't think they have any choice," Edward Menashy, an
economist at Charles Stanley in London, said of the Fed and
Treasury plan for the mortgage finance companies.
"If you allowed them to fail the entire property market
would collapse."
Banks led advancers, with HSBC <HSBA.L>, the biggest
individual positive weight in the market, rising 2.8 percent.
Lloyds TSB <LLOY.L> added 7.2 percent and Royal Bank of Scotland
<RBS.L> rose 3.8 percent.
Around Europe, Britain's FTSE 100 <> rose 1.7 percent,
Germany's DAX <> added 1.1 percent and France's CAC
<> put on 1.6 percent.
M&A DRIVE
M&A activity helped drive the advance in European shares.
TNT NV jumped 25.6 percent after a Financial Times report over
the weekend that FedEx Corp <FDX.N> is in preliminary talks to
acquire the Dutch mail company. TNT declined to comment.
Continental leapt 25 percent after a German newspaper
reported on Sunday that the world's fourth-largest tyre maker is
in talks with a smaller German engineering company Schaeffler
about a takeover offer that values Continental at more than 10
billion euros ($15.8 billion). Continental said it had a brief
conversation with Schaeffler about a possible engagement.
InBev <INTB.BR> added 3.5 percent after U.S. brewer
Anheuser-Busch Cos Inc <BUD.N> accepted its sweetened $52
billion takeover bid, creating the world's largest beer maker.
British bank Alliance & Leicester <ALLL.L> rocketed 49
percent after saying it was at an advanced stage of discussions
about receiving a takeover offer that would value its shares at
317 pence per share. A&L did not name the potential bidder.
[]
Shares in Britain's biggest commercial broadcaster ITV
<ITV.L> leapt 8.1 percent after the Financial Times newspaper
quoted the co-founder of producer Endemol as saying a
combination of the two companies "could make sense, depending on
the numbers".
But Norwegian aluminium group Norsk Hydro <NHY.OL> dropped
12.5 percent after warning that earnings for the second quarter
would be 20 percent below the first-quarter level, hit by a
significant increase in costs in its metal business.
StatoilHydro <STL.OL> shed 0.9 percent.
(Editing by Erica Billingham)
