Europe rallies to Brazil bailout

LONDON, England (Reuters) -- Spanish blue chips and ABN Amro led European stock markets to sweeping gains on Thursday, cheered by a bumper IMF bail-out package for Brazil, where they are all highly exposed.

Dutch insurer Aegon jumped after it clarified last month's profit warning and Germany's BASF led chemical stocks higher by posting stronger-than-expected earnings and reiterating its full-year guidance.

On the downside, Britain's Royal & Sun Alliance and France's Vivendi Environnment both plummeted -- the former after it slashed its dividend and raised the spectre of a rights issue and the latter after it unveiled poor first-half revenue numbers.

"Today the second-quarter figures have been quite good and on balance, over the whole reporting period, they've been above expectations," said Sharon Coombs, European equity strategist at HSBC.

"However, often it's due to cost-cutting and cost control rather than a real top-line boost, and the outlook statements are still quite cautious."

By 1556 GMT, with only the German market still officially trading, the FTSE Eurotop 300 index of pan-European blue chips was 3.77 percent firmer at 950.3 points.

It has added around 10 percent since it hauled itself off five-year lows on July 24 and has gained 3.7 percent this week.

However, it has still not quite clambered back to the levels it plumbed last September, in the wake of the World Trade Center attacks, and has shed 25 percent since the start of the year.

The narrower DJ Euro Stoxx 50 index on which ABN Amro and Spain's heavyweight stocks all feature, soared 4.64 percent.

The noise from Brazil

The International Monetary Fund's $30 billion cash lifeline for Brazil was the fund's biggest ever, and far surpassed analysts' expectations.

It gave a shot in the arm to Spain's Santander Central Hispano (BSC), rival Banco Bilbao Vizcaya Argentaria and telecoms giant Telefonica, all of which have been dogged by financial turbulence in Latin America.

Shares in the three companies jumped by between 7.7 and 8.6 percent and Madrid's general and blue-chip indices added 4.27 and five percent respectively.

"The Brazil news is a strong positive in the short-term for these stocks," said Eugenio de Benito, a fund manager at GesMadrid in the Spanish capital.

"But the longer-term outlook really depends on how the foreign exchange and government bond markets respond and on what happens in October's presidential elections."

The Brazilian news also helped mask slightly worse-then-expected results from Dutch bank ABN Amro.

It reported a rise in provisions and said full-year earnings would be in line with last year, but its shares leapt 11.5 percent as investors focused on the impact of the IMF package on the bank's nine-billion-euro holding of Brazilian government debt and loans.

Health stocks were in vogue, partly due to their defensive qualities and their recent batch of reassuring results from the sector, but also due to corporate news.

Shares in Swiss-based Serono, Europe's biggest biotechnology company, added 5.4 percent after it snapped up rights to an experimental psoriasis drug from Genentech Inc of the United States.

Sun goes down

Royal & Sun's share price was massacred after it cut it dividend, said it was looking at raising capital to shore up finances, made an unexpected provision against losses from the World Trade Center attacks and shut its UK life funds to new business with the loss of 1,200 jobs.

Its shares plunged 21 percent to 107 pence and at one point dipped below the 100 pence mark for the first time in 10 years.

Vivendi Environnment lost 6.8 percent, partly due to its poor revenues and partly due to persistent worries media giant Vivendi Universal might sell its stake in the utility.

German financial group MLP continued its spectacular climb away from its year lows, adding 26.3 percent after a major fund placed its faith in the stock.

On the economic front, U.S. weekly jobs data was better than expected while U.S. producer prices declined in July, leaving Federal Reserve officials with few inflation worries ahead of their meeting on interest rates next week.

"This data reinforces the likelihood of a jobless economic recovery and not that of a double-dip recession," said Matthew Wickens, global economist at ABN Amro.

"It also makes it marginally more likely the Federal Reserve will change its stance on monetary policy to an easing bias."