REFILE-Europe stocks rise 2.1 pct on surge in banks, autos

(Refiles to fix Reuters Instrument code for Volkswagen)

* FTSEurofirst 300 ends 2.06 percent higher

* Banks rally ahead of U.S. housing market rescue bill

* Autos soar on strong results and a fall in oil

By Patrizia Kokot

LONDON, July 23 (Reuters) - European shares ended more than 2 percent higher on Wednesday as banks enjoyed their best day in four months ahead of a vote on a U.S. housing market rescue bill, while autos gained on strong earnings and oil fell.

The FTSEurofirst 300 index of top European shares .FTEU3 closed 2.06 percent higher at 1,188.99 points, after rising as much as 2.3 percent earlier in the session.

Banks, which are still down 30 percent since the start of the year, recorded their biggest one-day gain since mid-March with the DJStoxx European banking index .SX7P soaring 6.2 percent.

HBOS HBOS.L rallied 16.8 percent amid trader talk that Spain's BBVA (BBVA.MC) had cast an acquisitive eye on the British lender. Both banks declined to comment.

Other big advancers included Barclays (BARC.L), up 11.8 percent, Credit Agricole (CAGR.PA), up 7.4 percent, and Credit Suisse (CSGN.VX), up 7.1 percent.

"Anything that supports the mortgage market is encouraging," said Stephen Pope, chief global market strategist at Cantor Fitzgerald Europe, adding that further support was needed for commercial banks.

All eyes were on the U.S. House of Representatives, which was expected to vote some time after 1930 GMT on a major housing market rescue bill, including a plan to bolster mortgage finance giants Fannie Mae (FNM.N) and Freddie Mac (FRE.N).

In addition, the White House confirmed that President George W. Bush would sign a housing rescue package into law despite opposing part of the legislation.

"What we need to see is that extra line to commercial banks or fringe banks which were crowded out by Freddie Mac and Fannie Mae and then had to go to the subprime market. They are only getting support if they are deemed essential for the system and banks such as Indymac were not essential and had to pay the price," he added.