By Sitaraman Shankar
LONDON, April 18 (Reuters) - European stocks surged 2.4
percent on Friday to their highest close in 10 days, driven by
banks that jumped after Citigroup's <C.N> update underscored
hopes that the end of the global credit crisis was in sight.
The FTSEurofirst 300 <> index of top European shares
ended 2.4 percent higher at 1,325.90 points, its highest close
since April 7 and its biggest one-day gain since April 1.
The index has risen 5 percent in April, putting it on track
for its best month since October 2003.
Among other banks, UBS <UBSN.VX> rose 5.4 percent, Santander
<SAN.MC> 3.2 percent and Societe Generale <SOGN.PA> 5.9 percent.
Citigroup posted a $5.1 billion quarterly loss and unveiled
plans to axe 9,000 more jobs, but investors cheered Chief
Executive Vikram Pandit's moves to get past credit market
problems and cut costs, and the shares rose 7.6 percent in New
York.
It follows similar share price rises for Merrill Lynch
<MER.N> and JPMorgan <JPM.N> this week after investors shrugged
off large writedowns and focused on signs of better days ahead.
"Good news for Citi and Merrill and everybody in financials
that's had a well-known exposure to subprime -- this is the
quarter they get to clear the decks," said Arthur Hogan, chief
market analyst at Jefferies & Co in Boston.
Banks have been the biggest losers in a sell-off stemming
from credit market problems linked to a collapse in risky, or
subprime, U.S. mortgages and investors say some of the
beaten-down stocks may now be good value.
Royal Bank of Scotland <RBS.L> put on 4.9 percent despite a
source saying it was set to launch a rights issue next week that
analysts estimate could raise $20 billion.
"We are moving into a phase now where the banks are
identifying the quantum of the losses," said Justin Urquhart
Stewart, investment director at Seven Investment Management.
"The reason Royal Bank of Scotland will be looking to
increase their cushion of support is they know they can only
come to the well once to draw water. If banks can draw a line
under this, then you're okay," he said.
Pharmaceuticals also rose, with Novartis <NOVN.VX> up 3.3
percent after a Morgan Stanley upgrade, while Roche <ROG.VX>
gained 3.7 percent, bouncing back from recent weakness.
COMMODITIES DIVERGE
Commodity stocks were mixed, with miners falling and oil
stocks tracking a jump in crude.
Kazakh miner Kazakhmys <KAZ.L> fell 6.4 percent and peer
Eurasian <ENRC.L> lost 4.5 percent as a senior government
official said Kazakhstan may impose a metals export duty to
raise budget revenue.
Vedanta <VED.L> slipped 2.2 percent and Anglo American
<AAL.L> fell 1.8 percent.
But a jump in crude to a record $116.29 a barrel lifted
index heavyweight BP <BP.L> by 1 percent and Total <TOTF.PA> 1.5
percent.
Around Europe, Germany's DAX index <> was up 2.4
percent, the UK's FTSE 100 index <> gained 1.3 percent and
France's CAC 40 <> advanced 2.1 percent.
Despite Friday's rally, analysts said risks remain for
stocks because the U.S. economic downturn will prompt companies
to lower their outlooks.
"Profit warnings in non-financial sectors are not yet
integrated in the market. And that is why there are such sharp
corrections like Nokia <NOK1V.HE> yesterday," said Arthur van
Slooten, strategist at Societe Generale in Paris.
"When profit warnings kick in, industrial stocks could react
much more negatively than financials when they report bad
results and writedowns. Just look at General Electric <GE.N> and
Nokia."
(Additional reporting by Amanda Cooper in London, Blaise
Robinson in Paris and Jennifer Coogan in New York)
(Reporting by Sitaraman Shankar; Editing by David Hulmes)
