* FTSEurofirst 300 gains 1.1 percent
* Banks advance after passage of $700 billion rescue plan
* Miners gain on higer metals prices
*
By Atul Prakash
LONDON, Oct 2 (Reuters) - European share prices gained early
on Thursday with the passing of a $700 billion banking industry
bailout package by the U.S. Senate rekindling hopes that banks
could advance on a recovery path.
At 0834 GMT the FTSEurofirst 300 <> index of top
European shares was up 1.1 percent at 1,084.03 points. The
benchmark closed 0.9 percent higher in the previous session, but
is down about 28 percent so far this year.
Swiss bank UBS <UBSN.VX> rose 9.5 percent after it said it
would make a small profit in the third quarter after a year of
losses, signalling it had started to turn the corner even as the
credit crisis still engulfs many U.S. and European peers.
Banking stocks were the top weighted gainers on the index,
with HBOS <HBOS.L> rising 13.3 percent, Lloyds TSB <LLOY.L>
rising 4.1 percent, Fortis <FOR.BR> gaining 15.5 percent and
Dexia <DEXI.BR> climbing more than 8 percent.
Shares in French bank Natixis <CNAT.PA> rose nearly 13
percent on market talk that the company's owners could buy out
the public shareholding and delist its shares. No immediate
comment was available from Natixis.
The support for the banking sector came from the U.S.
Senate, which approved the rescue package late on Wednesday,
putting pressure on the House to approve a plan that political
and financial leaders called crucial to averting economic
catastrophe.
"I wouldn't be surprised if we see a decent rally over the
next month as long as we get the passage of the bill so that
people can think that the building blocks are in place to make
the restructuring of the banking sector more orderly," said
Andrew Bell, head of research at Rensburg Sheppards.
"And we have got to have either the reality or the hope of
interest rates coming down," he added.
The revised legislation is aimed at reinvigorating worldwide
credit markets and interbank lending that had frozen up while
overleveraged financial institutions staggered under the weight
of failed mortgages.
But market participants said that the rescue package is not
a cure-all, with a worsening economic outlook spurring calls for
central banks to cut interest rates.
Gloomy economic data continued to pour in. British house
prices fell 1.7 percent in the month of September from August to
post their biggest annual drop since comparable records began in
1991, the Nationwide building society said.
ECB RATE DECISION AWAITED
Investors awaited the European Central Bank's rate decision
at 1145 GMT. The bank is expected to keep rates on hold at 4.25
percent but its views on the global financial crisis will be
scrutinised by the market.
"There is mounting pressure on the central bank to cut key
rates to help crisis-ridden banks and ward off the increasing
risks to the economy," German bank Helaba said in a commentary
note.
Across Europe the FTSE 100 <> index was up 0.9 percent,
Germany's DAX <> rose 0.6 percent and France's CAC 40
<> added 0.9 percent.
Miners broadly gained, tracking a rise in key base metals
prices and on positive market sentiment.
BHP Billiton <BLT.L>, Anglo American <AAL.L>, Lonmin
<LMI.L>, Kazakhmys <KAZ.L>, Xstrata <XTA.L>, Antofagasta
<ANTO.L> and Rio Tinto <RIO.L> rose between 0.6 and 3.9 percnet.
Energy stocks were also up despite a decline in crude oil
prices. BP <BP.L>, Royal Dutch Shell <RDSa.L>, gas producer BG
Group <BG.L> and Cairn Energy <CNE.L> added between 0.9 and 1.6
percent.
(Additional reporting by Peter Starck in Frankfurt; Editing by
Greg Mahlich)
