European equities leapt on Monday morning, adding to last week's recovery rally after a bailout for Spain's ailing banks prompted investors to scoop up battered financial shares, with Banco Santander surging 5.7 percent.
At 0807 GMT, the FTSEurofirst 300 index of top European shares was up 1.8 percent at 1,000.08 points, while the euro zone's blue-chip Euro STOXX 50 index surged 2.4 percent to 2,195.72 points, hitting a four-week high.
Over the weekend, euro zone finance ministers agreed to lend Madrid up to 100 billion euros for its bank rescue fund, more than an initial audit suggests it is likely to need.
"It's a big number, much bigger than what people had been expected. It reduces the systemic risk, so it's hard not to be buying this morning," said David Thebault, head of quantitative sales trading, at Global Equities.
"But all in all, it's a credit line, provided to one sector of the Spanish economy in a bid to stop the bleeding. We're still far away from the definitive solution here."
The euro zone STOXX banking index jumped 4.5 percent, with Spain's number two bank BBVA up 6.4 percent while UniCredit – Italy's biggest by assets – was up 3.4 percent and Credit Agricole rose 4.3 percent.
Meanwhile, Spanish and Italian bond yields fell across the curve, while the euro moved back above $1.26 against the dollar.
MARKET STILL VOLATILE
But despite the strong gains in banking stocks, the Euro STOXX 50 volatility index – Europe's main gauge of anxiety known as the VSTOXX – was down only 2.5 percent, hovering around 30, signalling cautiousness in the derivatives market.
"With U.S. stocks set to rally and a drop in buying pressure on the Bund, the equity rebound started last week could become a technical rally, and the target becomes the 50 percent retracement of the mid-March to early-June slump," Aurel BGC chartist Gerard Sagnier said.
"We've moved to 'buy' from 'neutral' for the short term, but once we've retraced half of the March-June drop, investors will probably start trimming their positions again."
The Euro STOXX 50 will face resistance at 2,250 points, representing its 50-day moving average, while the 50 percent retracement of the March-June drop is at 2,330 points, about 6 percent above current levels.
Around Europe, UK's FTSE 100 index was up 1.7 percent, Germany's DAX index up 2.2 percent, and France's CAC 40 up 2.1 percent.
Spain's IBEX – by far the worst performer in 2012 among European indexes – was up 4.1 percent.
