* FTSEurofirst 300 <> jumps 8.2 pct
* Biggest one-day percentage gain on record
* Financials soar on shorting ban, hopes for U.S. govt plan
By Sarah Marsh
FRANKFURT, Sept 19 (Reuters) - European shares surged on
Friday to their biggest one-day percentage gain on record, as
battered banks and insurers gained thanks to temporary bans on
short sales of financial stocks and the U.S. government's moves
to end the credit crisis.
The FTSEurofirst 300 index <> closed 8.2 percent
higher at 1,150.78 points, recouping some of the sharp losses
from earlier in the week and notching up the biggest one-day
percentage gain on record, according to Thomson Reuters data.
The benchmark has still fallen 0.9 percent in a
rollercoaster week, and is down 23.6 percent so far in 2008.
"We are watching history in the making, a scary one,
however, and it seems that the shake-out of the financial
industry has not necessarily come to an end yet," said Tim
Brunne, an analyst at UniCredit in a research note.
In the most recent example of a government entity stepping
in to ease fears, the U.S. Treasury Department said it will use
$50 billion to back money-market mutual funds whose asset values
fall below $1 in another step to contain raging financial
turmoil. []
In addition the U.S. Treasury Secretary Henry Paulson and
Federal Reserve Chairman Ben Bernanke plan to work through the
weekend with Congress on a plan to deal with toxic bank assets
choking the financial system.
The idea has been compared with the Resolution Trust Corp
formed in 1989 to deal with the savings and loan industry
collapse.
"It was important for somebody to get the garbage off the
banks' balance sheets so that they trust each other more than
one or two days," said Giuseppe-Guido Amato, strategist at
brokerage Lang & Schwarz.
"Because if not you will have every day new liquidity
demands from the banks to the Federal Reserve or the European
Central Bank."
Banks were the biggest weighted sectoral gainer on the
index, with UBS <UBSN.VX> surging 31.66 percent, Barclays
<BARC.L> advancing 29.24 percent and HBOS <HBOS.L> jumping 28.91
percent. The DJ Stoxx European banks index <.SX7P> was up 17.46
percent.
Financial stocks, which were battered this week after Lehman
Brothers filed for bankruptcy protection, were also boosted by
the temporary imposition of short-selling bans across the world.
The UK Financial Services Authority imposed its ban on the
short selling of financial stocks on Thursday, while the short
selling of 799 financial stocks is to be halted in the United
States under an emergency Securities and Exchange Commission
order. National market watchdogs in France, Portugal and Ireland
took similar steps.
FOCUS ON REAL ECONOMY?
Analysts said that while the latest government measures have
buoyed stock markets and may ensure the survival of the current
financial system, equity markets will continue to suffer from a
slowdown in the real economy.
"The immediate market impact is already proving to be
extremely powerful, partly because it is lifting investors out of
a dangerous slump of pessimism and desperation," said Marco
Annunziata at UniCredit in a note.
"It will take longer for markets to work out the full
implications and the extent to which the plan can offset the
risks emanating from the global slowdown already underway."
Moody's Economy.com said: "The release of forward indicators
of economic activity and inflation in the euro zone in the third
quarter, particularly the September German Ifo survey and the
August ECB monetary aggregates, will also be closely watched."
Insurers were the second-biggest gainers on Friday, with
Aviva <AV.L> rising 18.26 percent, Old Mutual <OML.L> up 19.42
percent and Prudential <PRU.L> up 23.46 percent.
Among the few losers in the FTSEurofirst, Volkswagen
<VOWG.DE> was 13.8 percent lower after Lower Saxony said it was
not buying shares in the group.
(Additional reporting by Brian Gorman and Atul Prakash; Editing
by Greg Mahlich)
