* FTSEurofirst 300 up 6.7 pct
* Banks surge after Eurozone guarantees, liquidity boost
* Oils bounce as crude prices gain
By Brian Gorman
LONDON, Oct 13 (Reuters) - European shares surged in early
trade on Monday, bouncing from Friday's slide, after Eurozone
governments announced guarantee measures for banks and central
banks moved to boost liquidity.
At 0828 GMT, the FTSEurofirst 300 <> index of leading
European shares was up 6.7 percent at 908.10 points after
a 22 percent fall last week.
The index, which plunged to a 5-year low last week, has lost
nearly 40 percent so far this year, punctured by a credit crisis
that has led to big losses at the region's banks, frozen
interbank lending and slowed the economy.
After an emergency meeting in Paris over the weekend,
European governments agreed to provide capital for banks caught
short of funds because of frozen money markets and to insure or
buy into new debt issues.
Banks were the top weighted gainers, with BNP Paribas
<BNPP.PA>, Credit Agricole <CAGR.PA>, UBS <UBSN.VX>, Dexia
<DEXI.BR>, Standard Chartered <STAN.L>, Societe Generale
<SOGN.PA> and Deutsche Bank <DBKGn.DE> rising between 6.1 and 14
percent.
Credit Suisse <CSGN.VX> gained 12 percent after Merrill
Lynch upgraded it to "neutral" from "underperform", saying last
week's 40 percent fall was overdone. Baer Holdings <BAER.VX>
rose 12 percent after Deutsche Bank upgraded it to "hold" from
"sell".
The world's top central banks on Monday announced further
measures to improve liquidity in short-term U.S. dollar funding
markets.
European central banks said on Monday they would lend out as
much U.S. dollar liquidity as commercial banks needed in a
further joint bid to resolve money market tensions.
In a joint announcement with the U.S. Federal Reserve, the
European Central Bank, the Bank of England and the Swiss
National Bank said they would meet all bids from commercial
banks at a fixed interest rate.
"You'd expect a rally after the freefall last week," said
Bernard McAlinden, investment strategist at NCB Stockbrokers.
"The 15 members of the eurozone agreeing guarantees and bank
recapitalisation measures, that's positive, and there's talk of
the U.S. bringing guarantees into the toolbox. The patchwork
quilt is filling out in terms of guarantees and other remedies."
The interbank cost of borrowing three-month sterling and
euro funds eased on Monday.
UK BANKS PACKAGE
Three major British banks could take 37 billion pounds ($64
billion) in government money to boost their capital, the UK
Treasury said. In Paris, a report by Dow Jones Newswires said
the French government would create a 40 billion euro ($55
billion) fund to take stakes in banks.
The French presidential office declined to comment on the
report.
A German financial rescue plan includes a fund to provide up
to 400 billion euros in guarantees for banks, according to a
draft bill seen by Reuters on Monday.
The terms of Lloyds' <LLOY.L> acquisition of HBOS <HBOS.L>
have been renegotiated. HBOS shareholders will now receive 0.605
Lloyds shares for each HBOS share, down from 0.83 previously.
HBOS shares fell 6.3 percent, while Lloyds was up 10.6
percent. Barclays, which said it was not taking government money
but would raise cash from investors, gained 14 percent, and RBS
was up 2.2 percent.
Oils also played a major part in boosting the index, after
crude prices <CLc1>, which fell 10 percent on Friday, gained
nearly $4. Oil was recently trading at $81.43 a barrel.
Total <TOTF.PA>, ENI <ENI.MI>, BP <BP.L> and Royal Dutch
Shell <RDSa.L> gained between 5.4 and 6.2 percent.
Mining shares also rebounded, as gold <XAU=> and copper
<MCU3> prices regained some lost ground. Rio <RIO.L> was up 13
percent and Anglo American <AAL.L>, BHP Billiton <BHP.L>, and
Xstrata <XTA.L> were up 8.9-11 percent.
Dutch company Philips Electronics <PHG.AS> was down 1.3
percent after the company said it posted a 71 percent fall in
third-quarter core profit as a charge for asbestos claims and
restructuring costs impacted the group result. []
It was one of just four fallers in the index.
NCB's McAlinden said a significant rally was unlikely.
"The other side is that we've got more Q3 earnings reports
coming up, which may contain bad news, but it would take bad
earnings news to justify the steep falls we've had," he said.
"The market has capitulated a few times already. We are
reluctant to say this is the final capitulation. If this is the
bottom, it will be a while before we know it. We won't be going
up quickly."
(Additional reporting by Atul Prakash; editing by Sue Thomas)
