European stocks end 3 percent higher on bailout hopes

By Blaise Robinson

PARIS (Reuters) - European stocks gained 3 percent on Friday, as banks stocks rose, tracking a rally on Wall Street on hopes a $700 billion (396 billion pound) bailout plan to stabilise financial markets will be approved by the U.S. House of Representatives.

The FTSEurofirst 300 .FTEU3 index of top European shares closed 3 percent higher at 1,089.38 points. On the week, the benchmark index lost 1.4 percent.

Recently hammered banks surged, with BNP Paribas (BNPP.PA) gaining 9.4 percent, Barclays (BARC.L) rising 8.9 percent and Credit Suisse (CSGN.VX) adding 8.3 percent.

The sector was also buoyed by news that Wells Fargo (WFC.N) agreed to buy embattled bank Wachovia WB.N, fuelling hopes of more consolidation among banks.

Wells Fargo said it would buy Wachovia for about $16 billion, apparently besting a government-backed Citigroup (C.N) bid for some of the bank's assets.

The House of Representatives, which rejected a first version of the plan, was expected to vote on the package on Friday. The plan would help purge banks' balance sheets of bad mortgage-related debt and unclog the credit market.

Hopes for the plan eclipsed bleak U.S. jobs data that showed U.S. employers cut an unexpectedly large 159,000 jobs last month --a ninth straight monthly fall in jobs and the deepest in 5-1/2 years, suggesting the U.S. economy may be in recession.

Economists surveyed by Reuters had forecast 100,000 jobs would be cut.