|Chennai||Rs. 24470.00 (1.37%)|
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|Delhi||Rs. 24200.00 (1.26%)|
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* 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 percent.
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 positive signal.
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 aversion.
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 growth.
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 as Italy.
Despite the day's gains, the Euro STOXX 50 remained under a downward trendline started in mid-September, at 2,506 points on Monday.
"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 percent."