* FTSEurofirst 300 up 0.4 pct, Euro STOXX 50 up 0.9 pct
* Euro STOXX 50 back above 50-day moving average
* Still 3-4 percent downside potential -Aurel BGC chartist
By Blaise Robinson
PARIS, Oct 15 (Reuters) - European shares rose in early
trade on Monday, reversing the previous session's losses, lifted
by hopes that struggling Spain will request a bailout which
would lower its borrowing costs.
Euro zone sources told Reuters over the weekend that Spain
could request a bailout in November and if it does, the request
would likely be dealt with alongside a revised loan programme
for Greece and a bailout for Cyprus in one big package.
"We're finally starting to see some light at the end of the
tunnel of the euro zone debt crisis, and this time it doesn't
look like it's a train coming," said David Thebault, head of
quantitative sales trading at Global Equities.
At 0800 GMT, the FTSEurofirst 300 index of top
European shares was up 0.4 percent at 1,098.14 points, after
losing 0.5 percent on Friday.
Euro zone banking stocks set the pace on Monday, with
Commerzbank up 1.8 percent, Societe Generale
up 1.6 percent and UniCredit up 1.7 percent.
Around Europe, Germany's DAX index was up 0.7
percent, France's CAC 40 up 0.9 percent, Italy's FTSE
MIB up 0.8 percent and Spain's IBEX up 0.8
UK's FTSE 100 index was falling behind, up 0.3
percent as heavyweight mining shares felt the pinch of lower
metals prices, hurt by nagging concerns over global growth.
Rio Tinto was down 0.7 percent and Xstrata
down 0.2 percent.
The euro zone's blue chip Euro STOXX 50 index
was up 0.9 percent at 2,489.95 points, inching back above a key
resistance level, the 50-day moving average, at 2,487.63 points.
The Euro STOXX 50 volatility index, Europe's
widely-used measure of investor risk aversion known as the
VSTOXX, was down 2.5 percent to 21.33 in early trade, sending a
The VSTOXX, which measures the cost to protect stock
holdings against potential pull-backs as it usually moves in an
opposite direction to equities, has lost nearly 8.5 percent in
four sessions, signalling a sharp drop in investor risk
The Euro STOXX 50 surged more than 20 percent between late
July and mid-September, boosted by expectations of bold measures
by central banks to tackle the debt crisis and revive economic
But the rally has since lost steam, as investors await to
see if Spain will request a bailout, which would help limit
contagion of the debt crisis to other euro zone countries such
Despite the day's gains, the Euro STOXX 50 remained under a
downward trendline started in mid-September, at 2,506 points on
"We're seeing new resistances taking shape," Aurel BGC
chartist Gerard Sagnier said. "There's still downside potential,
which could reach more than half of the rally started on July
25, which would represent a further pull-back of about 3-4