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European shares jump, led by banks, energy stocks

LONDON - European shares jumped on Tuesday to add to a record percentage rise a day earlier, with investors scooping up energy and bank stocks after measures by governments to end the worst financial crisis since the Great Depression.

By 1116 GMT, the pan-European FTSEurofirst 300 index was up 5.5 percent at 988.79 points, adding to a more than 10 percent rally on Monday.

Banking stocks were among the top-weighted gainers on the index, while commodity shares also advanced, helped by improved market sentiment and a jump in crude and metals prices.

Barclays surged 12.5 percent, UBS added 9 percent, and Standard Chartered and Societe Generale both rose 8.6 percent.

‘The risk of a possible systemic failure of the global banking system has dramatically reduced as political and financial authorities around the world work in a coordinated way to restore confidence to improve liquidity,’ said Henk Potts, equity strategist at Barclays Stockbrokers.

‘That allowed investors to sail on calmer waters in the course of the trading sessions yesterday and today ... (but) there is still a longer-term discussion about the practical implications of the credit crunch.’

The interbank cost of borrowing three-month dollars had its biggest fall since March, and three-month euro rates the biggest fall this year on Tuesday.

The market also got support from news that the United States will announce plans on Tuesday to inject $250 billion into its banks and mark a turning point in the global financial crisis, following a concerted European drive to do the same.

The US Treasury is due to unveil its plan at 1230 GMT, with about half of the total figure likely to go to the top nine US banks alone to get them lending to each other again, people familiar with the plan said.

US stocks posted double-digit percentage gains overnight, and Asian equity markets rallied strongly on Tuesday. Tokyo's Nikkei soared over 14 percent, its biggest one-day gain ever.

‘Risk appetite of global investors is increasing gradually,’ Germany's Commerzbank said in a note.

Across Europe, Britain's FTSE was up 5.8 percent, Germany's DAX jumped 5.4 percent, and France's CAC added 5.5 percent.

But Belgian-Dutch financials services group Fortis NV

sank 70 percent as it resumed trade after being suspended since Oct. 3.

The group outlined a drastically reduced business structure after its carve-up and nationalisation, and asked on Tuesday to be exempt from reporting its forthcoming quarterly results.

LONG-TERM RISKS

Analysts said fears of a looming global recession were not dead, but for now the sweeping emergency steps being enacted by governments reduced the risk of financial system failure.

British consumer price inflation hit a 16-year high of 5.2 percent in September, while a survey showed German investor sentiment worsened by more than expected this month due to the financial crisis.

Energy shares were the biggest weighted sectoral gainer on the FTSEurofirst 300 index, tracking a jump in crude oil prices.

BP, Royal Dutch Shell, BG Group and Tullow Oil surged between 6.3 and 16.9 percent.

Mining stocks also got comfort from metals prices, with copper jumping more than 7 percent, gold gaining 2 percent and nickel rising over 5 percent.

BHP Billiton, Anglo American, Vedanta Resources, Lonmin, Kazakhmys, Xstrata, Antofagasta and Rio Tinto rose between 2.9 and 14.6 percent.

British confectionery giant Cadbury Plc rose 5.5 percent after it reported a 6 percent rise in third-quarter underlying sales and announced a further 580 job cuts to keep it on track to meet its annual sales and profit margin goals.