European shares advance

European shares notched up their biggest one-day gain in a month on Monday, led by banks and insurers, on hopes eurozone leaders will unveil fresh measures to help resolve the region's debt crisis, ahead of a summit next week. The FTSEurofirst 300 index of top European shares rose 3.6 percent to 940.88 points, the highest close in more than a week and the biggest one-day gain since October 27.
However, the index is still down 5.5 percent in November. Trading volume was nearly 15 percent below the index's 90-day average. The heavyweight banking sector contributed most to the index's gain. BNP Paribas rose 10.3 percent. The STOXX Europe 600 Banking Index rose 5.7 percent, though it is still down 36.5 percent in 2011, with several banks having had to write down the value of government bonds in the eurozone periphery. Insurer AXA, also exposed to the eurozone periphery, surged 13.1 percent.
Germany and France stepped up a drive on Monday for powers to reject eurozone members' budgets that breach EU rules. Finance ministers of the 17-nation currency area meeting on Tuesday are due to approve detailed arrangements for scaling up the European Financial Stability Facility rescue fund to help prevent contagion in bond markets.
But some strategists remained sceptical about hopes for a resolution to the crisis. They pointed to low trading volume and said recent weakness in the market, tempting buyers, was a major factor behind the surge in shares. Belgian banks rose, with KBC up 13.8 percent after the country's government negotiators over the weekend secured an agreement on a budget for 2012, helping assuage concerns about the value of Belgian government bonds that the lenders hold.
Banks with exposure to Italy, which includes several French banks, benefited from a report in Italian newspaper La Stampa suggesting the International Monetary Fund was preparing a rescue plan for Italy worth up to 600 billion euros, later dismissed by an IMF spokesperson. 10-year Italian bond yields fell, but remained above 7 percent. Higher bond yields in the eurozone have been a major factor in pulling equities lower in recent weeks.
Many strategists are disappointed with the level of bond buying by the European Central Bank to calm government debt markets. It bought 8.5 billion euros of eurozone government debt in the latest week, in line with its previous activity but well short of what economists say is necessary to turn market sentiment around. Across Europe, France's CAC40 and Italy's FTSE MIB were among the strongest performers, up 5.5 and 4.6 percent respectively.