* FTSEurofirst 300 up 4.2 pct after sharp U.S., Asia gains
* Government bail-outs, liquidity injections lift banks
* Energy stocks top gainers as oil price rises
By Peter Starck
FRANKFURT, Oct 14 (Reuters) - European shares rallied for a
second day on Tuesday, following robust gains for U.S. and Asian
equities, as investors cheered government and central bank
measures designed to end the financial crisis.
By 0900 GMT, the pan-European FTSEurofirst 300 index
<> was up 4.2 percent at 976.96 points, adding to its
biggest one-day percentage rise on record -- 10.1 percent -- on
Monday.
In points terms, the benchmark index has now clawed back
more than half of last week's losses.
"Most of the recovery is probably behind us by now," said
Thomas Gruener, equity strategist at LandesBank Berlin.
UniCredit said the coordinated approach adopted by the euro
zone countries to combat the credit crisis "is improving the
extremely negative sentiment and relieving some pressure on the
strongly oversold equity markets."
Investors in Europe were also drawing comfort from a U.S.,
plan due to be unveiled at 1230 GMT and expected to entail $250
billion worth of capital injections into U.S. banks.
About half of the total was likely to go to the top nine
U.S. banks to get them lending to each other again, people
familiar with the plan said.
U.S. stocks posted double-digit gains overnight and Asian
equity markets rallied strongly on Tuesday. Tokyo's Nikkei
<> soared more than 14 percent, its biggest one-day gain
ever.
"Risk appetite of global investors is increasing gradually,"
Germany's Commerzbank said in a note.
Hopes that the steps announced by governments and central
banks to resuscitate comatose credit markets would prove
sufficient to avoid a prolonged slump in economic growth pushed
the crude oil price <CLc1> more than 3 percent higher towards
$84 a barrel, helping energy stocks.
Oil & gas shares <.SXEP> were the top weighted gainers, with
BP <BP.L> up 7 percent, Royal Dutch Shell <RDSa.L> up 6.5
percent, ENI <ENI.MI> up 7.5 percent and Total <TOTF.PA> up 7
percent.
MUDDY DETAILS
Banks <.SX7P> extended Monday's rally although the details,
of many of the rescue packages remained unclear.
"Near term, we view the combined response from European
governments as a positive limiting systemic risk, and we now view
liquidity driven defaults as less likely," JPMorgan said in a
note on European banks.
Ratings agency Moody's said "a substantial de-risking of the
banking system is being achieved by providing significant
capital and transferring banks' credit risk to their supporting
governments for the period necessary to restore confidence and
normal financial market operations".
Shares in Deutsche Bank <DBKGn.DE> rose 11.5 percent,
Barclays <BARC.L> gained 11 percent and CS Group <CSGN.VX> added
3 percent.
"The response of policymakers to the global economic crisis
over the weekend reassured the markets but concerns for a global
recession remain," Marfin Analysis in Greece said.
"We expect valuations to play a bigger role in investment
decisions going forward," Marfin said in a note.
UniCredit said the corporate earnings reporting season
beginning in Europe would likely see many companies issuing
"very muted guidance", confirming that the financial crisis was
feeding through to the real economy.
Shares in British confectionery giant Cadbury Plc <CBRY.L>
rose 4.5 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.
Whitbread <WTB.L> Britain's biggest hotel and restaurants
operator, rose 3.3 percent after the company reported a
first-half pretax profit ahead of expectations.
Burberry <BRBY.L> also beat forecasts with a 13 percent rise
in first-half revenue, but its shares fell 2.2 percent. Chief
Financial Officer Stacey Cartwright told reporters that trading
was extremely erratic and that it was difficult to forecast
demand for the key Christmas trading period.
Britain's FTSE 100 <> rose 4.3 percent, the French CAC
40 <> advanced 4.3 percent and Germany's DAX <> was
up 3.9 percent.
(Editing by Erica Billingham)
