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* STOXX Europe 600 index up 0.7 pct
* Italian banks among top gainers
* UniCredit jumps on plan to raise capital
By Atul Prakash
LONDON, Dec 13 Italian banks surged in choppy
trading on Tuesday, supported by Unicredit's latest
efforts to bolster its balance sheet and a surge in Mediaset
on takeover speculation.
Mediaset shares jumped 22 percent after French media group
Vivendi said it owned a 3 percent stake in the Italian
broadcaster and planned to raise that to as much as 20 percent,
fuelling expectations of a takeover bid.
The pan-European STOXX 600 index climbed to a new
11-month high and was last quoted 0.7 percent higher after
opening slightly lower.
Italy's banking index rose more than 3 percent,
helped by a 7 percent rise in UniCredit after it
unveiled plans to raise 13 billion euros ($13.8 billion) in the
country's biggest share issue. The aim is to shore up its
balance sheet and distance itself from Italy's broader banking
"It's a hard medicine to swallow, but UniCredit's move to
raise billions of euros and a restructuring programme would put
the bank in a much better shape," said Koen De Leus, chief
economist at BNP Paribas Fortis.
"Overall sentiment has improved on expectations that the new
government could support the banking sector and help Monte dei
Paschi di Siena to raise capital from private investors. I hope
they will not waste this crisis and clean up their
UniCredit's move came at a difficult time, with Monte dei
Paschi di Siena at risk of failure, a new government
just installed in Rome and early elections expected next year.
However, Monte dei Paschi shares were up 2 percent. A
Treasury source said on Monday that Italy was ready to pump
capital into the bank if it failed to get the 5 billion euros
($5.3 billion) it needed to remain in business from private
Italian banks had surged on short covering after Prime
Minister Matteo Renzi announced he would resign after a
referendum defeat on Dec. 4. The banking index is up nearly 21
percent since hitting a low on Dec. 5, boosted by hopes a new
government and the European Central Bank will help the country's
Investors are also keeping an eye on the Federal Reserve's
two-day policy meeting from Tuesday. It is widely expected to
hike rates for the first time in 2016, with markets pricing in a
nearly 100 percent chance of a quarter percentage point rise.
What matters most to investors is the Fed's statement and
economic projections, which will be examined for any signs of
reaction to Donald Trump's surprise victory in the Nov. 8 U.S.
Elsewhere, insurer and asset manager Standard Life
fell 1.4 percent after Deutsche Bank cut its rating on the stock
to "hold" from "buy" and reduced its price target by 5 percent,
citing pressure on the company's margins.
(Editing by Mark Trevelyan)