* FTSEurofirst 300 up 1.2 percent
* Banks among top gainers; Greek banks strong
* ArcelorMittal falls; forecasts lower prices
LONDON, Feb 10 (Reuters) - European shares were up at midday on Wednesday on hopes of a possible European Union rescue plan for Greece, with banks stronger and oil majors rising as crude prices rebounded.
By 1209 GMT the FTSEurofirst 300 .FTEU3 index of top European shares was up 1.2 percent at 993.01 points, on track to post its highest one-day percentage gain since January 4.
Expectations of a rescue plan for Greece were fuelled by comments from a senior German coalition source that European governments have agreed in principle to help the heavily indebted country. However, a German government spokesman said a decision had not yet been reached. [ID:nSGE61801C]
European Union leaders are set to hold a special summit on the economy on Thursday.
“We’ve seen some alleviation of the fears ... but it’s not a quick fix for Greece’s problems. It is crisis management -- we needed to do something and we needed to do something now,” said Geoff Wilkinson, head of investment research at Mint.
“I don’t think you could fix these things quickly. At this stage of the global recovery we don’t really need to have any more shocks to the system,” he said.
Greek bank shares .FTATBNK gained 7.9 percent while yield spreads between Greek bonds and German bunds tightened.
European shares fell 4 percent last week on jitters over the effects of debt problems in southern European euro zone countries, but is on track to gain for the third straight session on Wednesday.
“Maybe the market has exhausted its neurosis near term. You can’t have a sell-off every day on the basis of Greece. The market is consolidating but is still in a cyclical bull phase,” said Bernard McAlinden, investment strategist at NCB Stockbrokers, in Dublin.
Investor appetite for risky assets such as equities rose, with the VDAX-NEW volatility index .V1XI falling 4.3 percent. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks <0#.GDAXI>, the higher the market's desire to take risk.
On the downside, ArcelorMittal ISPA.AS, the world's biggest steelmaker, fell 5.1 percent. It forecast higher shipments but lower prices in the first three months of 2010 and a core profit that could fall from a fourth-quarter figure that just missed expectations. [ID:nLDE6180JH]
Some financials were also weak. Swedish bank SEB SEBa.ST fell 3.7 percent, after hitting a three-month low, as the group's fourth-quarter result showed weaker than expected core income from lending. [ID:nLDE61826X]
Compatriot Nordea NDA.ST lost 1.6 percent after its fourth-quarter operating profit missed forecasts and the Nordic region's biggest bank by value said risk-adjusted profit would be lower this year than last. [ID:nSAT008361]
On the macroeconomic front, The Bank of England forecast that British inflation would stand well below the 2 percent target in two years’ time if interest rates rose as fast as markets predict. [ID:nBOE002222]
Output in Germany’s engineering sector fell by nearly a quarter last year, worse than the industry’s most pessimistic forecast, and is not expected to rebound in 2010, the VDMA industry association said. [ID:nLDE6190Z6] (Additional reporting by Atul Prakash; Editing by Greg Mahlich)
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