European shares surge in early trade

European equities surged 3 per cent to a 10-day high early today as investors scooped up battered banking shares after a raised…

European equities surged 3 per cent to a 10-day high early today as investors scooped up battered banking shares after a raised buyout offer for Bear Stearns eased worries over financial sector valuations.

By 9.10am, the FTSEurofirst 300 index of top European shares was up 2.7 per cent at 1,259.59 points, after rising by more than 3 per cent shortly after the open.

The Dublin market followed the upward trend and by 9.45am was ahead more than 3 per cent at 6354 with the banking stocks among the main raisers. Anglo Irish Bank shares were ahead 6.7 per cent at €8.38, while Irish Life & Permanent stocks rose by just under 7 per cent to reach €12.50 at 9.45am.

Bank of Ireland and AIB were also up this morning - but by a more modest 2 and 3 per cent respectively. Ryanair shares were among the best performers in Dublin this morning, rising over 7 per cent to €2.96.

The rally, coming after a four-day Easter weekend, followed strong gains in US stocks yesterday after JPMorgan boosted its offer for Bear Stearns to $10 a share from $2. A surprising rise in sales of US pre-owned homes last month also lifted optimism that the worst of the housing slump may have passed.

European banks were the biggest gainers, with UBS up 6.2 per cent, Barclays up 9.3 per cent and UniCredit up 4.4 per cent.

Banking stocks have been hammered over the past eight months as turmoil in the risky US subprime mortgage market forced a number of financial institutions to unveil massive writedowns.

The DJ Stoxx bank index, up 4.5 per cent on Tuesday, is down 36 per cent from its peak last spring.

Energy shares rose this morning, as oil prices hovered around $100 a barrel. Total and Royal Dutch Shell were both up 2.3 per cent while BP was up 3.3 per cent. Mining stocks also surged along with base metal prices.