European stocks rise sharply as banks and telecoms stocks climb

MILAN (Reuters) - European shares rose sharply for the second consecutive session on Monday, boosted by a rebound in banking stocks and French telecoms shares due to signs of takeover activity in that sector.

The pan-European FTSEurofirst 300 index <.FTEU3>, which rose 3 percent on Friday, advanced by a further 3.1 percent on Monday. The euro zone's blue-chip Euro STOXX 50 index <.STOXX50E> also stood 3.3 percent higher.

The FTSEurofirst remains down around 12 percent so far this year because of worries over a global economic slowdown and concerns surrounding the health of Europe's banking sector.

But, bank stocks rose on Monday as investors welcomed plans by the European Central Bank (ECB) to buy bundles of Italian bad bank loans as part of its asset-purchase programme.

"It's no surprise to see markets rebounding after excessive movements seen in the last few weeks," said Riccardo Ambrosetti, chairman of Italy's Ambrosetti Asset Management. "European equities have been particularly hit and we expect a faster recovery for battered financial stocks."

Italian bank Monte Paschi (>> Banca Monte dei Paschi di Siena SpA) rose 9.9 percent, while shares in rivals Banco Popolare (>> Banco Popolare Societa Cooperativa) and Intesa Sanpaolo (>> Intesa Sanpaolo SpA) climbed 8.5 percent and 4.8 percent respectively.

The rise in the Italian banking sector helped other financial stocks in Europe, with Dutch group ING (>> ING GROEP) rising 5.9 percent and Credit Suisse (>> Credit Suisse Group AG) gained 4.2 percent.

French telecoms shares also surged on the prospect of an imminent deal between Orange (>> ORANGE SA) and rival Bouygues (>> BOUYGUES). Orange said talks were continuing between the two companies.

Shares in Bouygues climbed 6.2 percent, Orange rose 3.9 percent while rivals Iliad (>> ILIAD) and Numericable-SFR (>> Numericable Group) progressed 3.7 percent and 8.6 percent respectively.

"This latest news reinforces our belief that French market consolidation will happen, and Iliad will greatly benefit from it," analysts at Bryan Garnier wrote in a note.

Traders added that expectations of more monetary stimulus measures from the ECB were providing further support for equities.

Germany's Bundesbank slashed its forecast for inflation on Monday, in a signal that the same will happen across the wider euro zone, which could increase pressure on the ECB to loosen money supply.

Today's European research round-up [RCH/EUROPE]

(Editing by Andrew Heavens)

By Danilo Masoni

Stocks treated in this article : BOUYGUES, ORANGE SA, ILIAD, ING GROEP, Intesa Sanpaolo SpA, Credit Suisse Group AG, Numericable Group, Banco Popolare Societa Cooperativa, Banca Monte dei Paschi di Siena SpA