* FTSEurofirst 300 gains 1.4 pct, boosted by banks
* U.S. plan for Freddie Mac and Fannie Mae offers support
* M&A boosts Alliance & Leicester, InBev, Continental, TNT
By Patrizia Kokot
LONDON, July 14 (Reuters) - European shares jumped by midday
on Monday, with banks rising on a U.S. plan to rescue mortgage
finance groups Fannie Mae <FNM.N> and Freddie Mac <FRE.N>, while
acquisition activity buoyed sectors from brewers to banks.
By 1032 GMT, the FTSEurofirst 300 index <> of top
European shares was up 1.4 percent at 1,142.40 points,
recovering from Friday's three-year low.
Banks took a cautious step towards recovery with the DJStoxx
European banks index <.SX7P> adding 2 percent.
Fannie Mae <FNM.F> and Freddie Mac <FRE.F> jumped 23 and 40
percent respectively in Frankfurt after a U.S. Treasury and
Federal Reserve plan called for sweeping measures to lend money
and buy equity if needed in the government-sponsored
enterprises.
Banks also gained after Spain's Santander <SAN.MC> said it
had reached a deal to buy British bank Alliance & Leicester
<ALLL.L>. Alliance & Leicester shot up 50 percent, while
Santander rose 0.5 percent.
Barclays <BARC.L> added 5 percent, Lloyds TSB <LLOY.L>
rallied 6.5 percent and UBS <UBSN.VX> gained 2 percent.
"The fact that the U.S. institutions and congress are
bailing out the U.S. institutions Freddie Mac and Fannie Mae
draws a line under the financial system and shows that anything
really important to the system will not be allowed to fail,"
said Stephen Pope, chief global market strategist at Cantor
Fitzgerald Europe.
"The market has taken good heart from that and what we see
now is that the money that was kept out of the market for a long
time is back," Pope said, adding that it appeared that some of
the money was being employed in M&A.
GOOD PRICE
"It is a positive deal for Santander because it allows them
to gain market share in the UK for a very good price," analyst
Sandra Neumann at WestLB said. "They were in discussion before
but no price was settled on. Now the UK banks are of course very
cheap."
InBev <INTB.BR> gained 1.2 percent after U.S. brewer
Anheuser-Busch <BUD.N> accepted a sweetened $52 billion takeover
bid from the Belgian beermaker, with analysts voicing relief
that a bidding war could be avoided.
In reaction, Cheuvreux upgraded Inbev to "outperform" and
said the cost energies along were higher than anticipated at
$1.5 billion.
Dutch mail group TNT <TNT.AS> rallied 26 percent on the back
of a newspaper report that U.S. peer FedEx <FDX.N> was in early
talks to acquire the group.
TNT and FedEx declined to comment.
Merrill Lynch upgraded the stock, which also gained from
market speculation of a counterbid from UPS <UPS.N>.
German tyre and automotive systems maker Continental
<CONG.DE> jumped 25 percent amid talk of bid interest from
Schaeffler Group. The speculation lifted sector peers Michelin
<MICP.PA>, up 3.7 percent, and Sweden's Autoliv <ALIVsdb.ST>, up
6 percent.
Continental said it had held talks with Schaeffler.
Other gainers included Philips <PHG.AS>, which rallied 7.3
percent after beating consensus forecasts with its
second-quarter earnings.
And Spanish construction group Ferrovial <FER.MC> spiked 8.6
percent after it announced a key step in its long-awaited
refinancing plans for its British unit BAA.
Monday's casualty list featured oil and gas producers, which
fell after crude eased more than $2 a barrel to $143. Shares in
Total <TOTF.PA>, Shell <RDSa.L> and BP <BP.L> lost between 0.7
and 1 percent.
Norsk Hydro <NHY.OL> dragged industrial metal groups lower
after the Norwegian aluminium company issued a profit warning on
its second quarter, pointing to increases in costs.
Shares in the group fell 13 percent.
Dutch maritime engineering group SBM Offshore <SBMO.AS> shed
25 percent after it warned on full-year profit after Friday's
market close.
Dutch broker Petercam downgraded the stock to "reduce" in
and said: "This setback underlines that SBM is in a high-risk
business with limited pricing power".
(Editing by David Holmes)
