* FTSEurofirst 300 up 1.1 pct by midday
* Index recovers from steep losses on Thursday
* Banks, commodities lead gainers
By Sitaraman Shankar
LONDON, Oct 9 (Reuters) - European stocks rose by midday on
Thursday, breaking a three-day losing streak, as the previous
session's concerted global rate cut and UK bank bailout
emboldened investors to buy battered financials and commodities.
At 1108 GMT, the FTSEurofirst 300 <> index of top
European shares was up 1.1 percent at 951.11 points, but still
down more than 12 percent so far this week, placing it on track
for its worst week on record.
The index sank to its lowest close since December 2003 on
Wednesday as investors worried about economic growth despite
concerted rate cuts by the world's top central banks.
On Thursday, banks rose, led by Royal Bank of Scotland
<RBS.L>, which jumped 14 percent, and HBOS <HBOS.L>, which
jumped 29 percent.
Dexia <DEXI.BR> jumped 24 percent after France, Belgium and
Luxembourg announced they had agreed to provide state guarantees
for efforts by the troubled financial group to borrow.
The move was the latest in a series of attempts by
governments across the world to stabilise a tottering financial
sector, which have included bailout packages in the United
States and the UK and the rescue of Fortis <FOR.BR> in Belgium.
"Today we see some sort of stabilisation, which is more of a
technical reaction to recent falls," said Tammo Greetfeld,
strategist at UniCredit in Munich.
"The central bank move is merely positive from the
psychological point of view, as it calms down the situation
somewhat and shows that central banks are able to act in a
coordinated manner," he added.
"It doesn't change anything about the fear in money markets,
the deteriorating economic conditions and negative company
results and guidance."
Commodity shares rose, with miners BHP Billiton <BLT.L>,
Anglo American <AAL.L>, Rio Tinto <RIO.L> and Xstrata <XTA.L> up
6-9 percent and oil shares BP <BP.L> and Total <TOTF.PA> up 2
and 3 percent respectively.
The FTSEurofirst 300 has fallen 37 percent so far this year,
hit by a credit crisis that has frozen interbank lending, pushed
banks deep into the red and slowed the economy, hitting several
industrial sectors.
Underlining the severity of the problem, the cost of
borrowing overnight dollars remained significantly above the
Federal Reserve's new target rate, reflecting financial
institutions' demand.
Three month borrowing on interbank markets remained
expensive near this week's highs across all currencies and
actual lending beyond a week remained frozen.
U.S. stock index futures <SPc1> <DJc1> <NDc1> were up
1.3-2.4 percent.
REPLICATE UK PLAN?
The UK's FTSE 100 index <> was up 1.3 percent,
Germany's DAX index <> up 0.6 percent and France's CAC 40
<> up 2.2 percent.
On top of slashing interest rates, the European Central Bank
also halved the premium banks pay for emergency borrowing over
its main refinancing rate.
The ECB also said it was raising the rate it would pay banks
which deposited excess funds with it overnight, to 50 basis
points below its main rate from 100 basis points below it.
"They're opening the floodgates for liquidity," said David
Schnautz, interest rate strategist at Commerzbank in Frankfurt.
UniCredit's Greetfeld said he would like to see the UK
bailout plan, which envisages the government taking stakes in
banks and guaranteeing bond issues to an extent, replicated in
other countries.
"Taking stakes in the banks, and guaranteeing a certain
amount of bond issues is a better way of doing it than the U.S.
bailout plan. Encouragingly (U.S. Treasury Secretary Henry)
Paulson is also speaking of injecting equity in U.S. banks
playing a bigger role, which is positive."
Other major movers included ArcelorMittal <MTP.PA>, which
reaffirmed its third-quarter profit outlook and jumped 10
percent.
Siemens <SIEGn.DE> rose nearly 8 percent, boosted by a
newspaper report that the engineering group planned to settle a
U.S. Securities and Exchange Commission investigation earlier
and for a smaller fine than previously expected.
A Siemens spokesman said it was still uncertain how
proceedings in different countries might end.
(Additional reporting by Blaise Robinson in Paris; Editing by
Paul Bolding)
