LONDON, Sept 8 (Reuters) - European shares soared in early trade on Monday, bouncing from last week's slump, after the U.S. government seized control of major U.S. mortgage firms Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz).
At 0720 GMT, the FTSEurofirst 300 FTEU3 was up 3.6 percent at 1,165.79. France's CAC-40 .FCHI, Germany's DAX .GDAXI and the FTSE .FTSE notched up gains of between between 3.1 and 4.2 percent. "It will be big for the banks. Mortgage rates should come down, and this should give some stability to the market," said a Paris-based strategist.
"There will be a big one-day pop. But it's really only reclaiming what was lost last week. It's not a big break in the trend, which is still downwards," he added. The U.S. government on Sunday seized control of mortgage finance companies Fannie Mae and Freddie Mac, launching what could be its biggest bailout ever to support the U.S. housing market and ward off more global financial market turbulence.
The takeover plan makes it more explicit that debt issued by Fannie and Freddie will be backed by the U.S. government and curbed worries about possible losses among financial institutions and investors that hold such paper, analysts said.
Banks surged, with UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) up 11 percent, BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) up 8 percent, Credit Agricole (CAGR.PA: Quote, Profile, Research, Stock Buzz) up 11.1 percent and HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) up 13.8 percent.
The DJ Stoxx European banking sector index was up 5.5 percent.
Freddie Mac (FRE.F: Quote, Profile, Research, Stock Buzz) shares in Frankfurt were down nearly 60 percent.
(Report by Brian Gorman)
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