European shares rebound on Ambac bailout hopes

                                
 By Ana Nicolaci da Costa
                                
 LONDON, March 5 (Reuters) - European shares rose early on
Wednesday, with a report that a bail-out for U.S. bond insurer
Ambac Financial Group <ABK.N> was near helping shares bounce
back after five days of losses.
                                
 Hopes for a prompt rescue package for Ambac made banks the
top-performing sector in morning trade, led by gains in HSBC
<HSBA.L>, HBOS <HBOS.L> and UniCredit <CRDI.MI>, which rose
between 2 and 3.6 percent.
                                
 At 0946 GMT, the FTSEurofirst300 index <.FTEU3> was up 0.6
percent at 1,287.73 points, with banks leading the way after
being hit on Tuesday on concerns over possible trading losses.
                                
 Credit Agricole <CAGR.PA>, France's biggest retail bank,
posted a fourth-quarter loss as it booked large writedowns due
to the credit crunch but said it was not planning any major
acquisitions -- which traders said was helping the stock rise
2.9 percent.
                                
 Shares in Swiss bank UBS <UBSN.VX> -- the biggest victim of
the credit crisis among major European banks --  also rose 1.4
percent on market talk that the bank had offloaded Alt-A
mortgages to Pimco, a unit of Allianz <ALVG.DE>, traders said.
                                
 UBS declined to comment on the talk, while Pimco would not
confirm the speculation.
                                
 The bank sector has fallen by about 20 percent this year and
contributed in large part to the 15 percent fall in the broader
European equities market.
                                
 "Market sentiment generally is clearly still very fragile.
Quite a few stocks hit new lows yesterday and on Monday, so I
think we will probably see some sort of relief rally in the
markets before too long," said Darren Winder, head of macro and
strategy research at Cazenove.
                                
 "The recovery packages that are being put forward in the
U.S. (are) clearly helping the situation, but people are still
fearful of the sheer scale of the potential writedowns that
could be out there."
                                
 CNBC television reported on Tuesday that a deal to rescue
Ambac was near, helping the broader U.S. stock market cut losses
during its last trading hour.
                                
 
                                
 BRITAIN UNDERPERFORMS
                                
 Around Europe, Germany's DAX <.GDAXI> was up 0.8 percent,
France's CAC 40 <.FCHI> gained 0.5 percent and Britain's FTSE
100 index <.FTSE> underperformed with gains of only 0.2 percent,
or 8.1 points.
                                
 Several UK companies were lower as they traded without
entitlement to the next dividend payment, taking a total 30
points off the index. These included banks Barclays <BARC.L>,
Royal Bank of Scotland <RBS.L>, Lloyds TSB <LLOY.L> and oil
major Royal Dutch Shell <RDSa.L>.
                                
 The financial sector has borne the brunt of data showing the
U.S. economy is slowing and investors' concerns that there is
more pain to come from the ongoing credit crisis that originated
in U.S. subprime mortgage defaults.
                                
 But the Ambac report and upbeat results from France also
helped the broader financial sector on Wednesday.
                                
 The biggest percentage gainer was French insurer CNP
Assurances <CNPP.PA>, which posted higher 2007 profits late on
Tuesday and said it expected further growth in 2008, despite a
possible decline in its core domestic market. The stock was up
4.7 percent.
                                
 British insurer Prudential <PRU.L> was up 4.3 percent ahead
of the results of a vote on an equity raising by Ping An
Insurance <601318.SS>, which could allow the Chinese giant to
take stakes in European counterparts.
 (Reporting by Ana Nicolaci da Costa, editing by Will Waterman)