UPDATE: Spanish Bank Shares Sharply Higher On EU Agreement

Spanish banking stocks moved sharply higher Monday following unprecedented moves by European governments, central banks and the U.S. Federal Reserve to contain Europe's sovereign debt crisis.

After an extended pre-opening auction, Banco Santander SA (STD), Spain's largest bank by market capitalization opened up 19%, while Banco Bilbao Vizcaya Argentaria SA (BBVA) opened 18% higher.

As of 0834 GMT, Spain's blue-chip IBEX-35 index was trading up 11%, to 10040 points, with all the stocks in the index firmly higher. BBVA was up 19% at EUR9.56, while Santander was up 18.6% at EUR9.14. Banco Popular Espanol SA (POP.MC), Banco de Sabadell SA (SAB.MC) and Bankinter SA (BKT.MC) all rose more than 10%.

The bounce back comes after several days of sharp losses for Spanish stocks, which investors had unloaded amid rising risk of contagion of the sovereign crisis from Greece to Spain and Portugal.

Euro-zone finance ministers in the early hours of Monday morning announced an EUR500 billion support plan for countries facing financial meltdown, with a pledge of up to EUR250 billion in additional funds from the International Monetary Fund.

The European Central Bank said it will intervene in the euro zone's public and private debt markets, opening the way for it to buy up European government debt.

Goldman Sachs said in a note to investors that the measures "would go a long way to restoring confidence," and would support bank shares. It recommended buying shares of Santander or Italy's Unicredit (UC.MI), as they both have a broad international presence and limited domestic exposure, plus generous dividends.

In addition to the European measures, the U.S. Federal Reserve said Sunday that it would revive an emergency lending program used during the financial crisis. The Fed will ship billions of dollars overseas through foreign central banks, including the European Central Bank, so they can, in turn, lend the money out to banks in their home countries in need of dollar funding.

-By Bernd Radowitz and Jonathan House, Dow Jones Newswires; +34 91 395 8121; jonathan.house@dowjones.com (Christopher Bjork contributed to this article.)

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