Banks began to recover in Europe as the markets there saw big gains.

The FTSE Eurofirst 300 was 2.73 percent higher to 1,550.62.

Frankfurt’s Dax gained 2.32 percent to 7,750.84, while the IBEX added 3.19 percent to 14,487.8 in Madrid and the Paris CAC-40 was up 3.27 percent to 5,730.82.

Commerzbank (FWB: CBK) topped the leaders on the Dax with a gain of 5.51 percent to €28.91, while Deutsche Bank was 4.27 percent higher to €94.19.

In Paris, BNP Paribas (Euronext: BNP; TYO; 8665) was up 5.14 percent to €78 and Societe Generale (Euronext: GLE) jumped 6.88 percent to €121.31.

Insurers also did well.

Allianz (FWB: ALV; NYSE: AZ) gained 4.17 percent to €157.97, while AXA (Euronext: CS; NYSE: AXA) was up 5.42 percent to €30.33.

The best performance on the CAC-40, however, came from Michelin (Euronext: ML), which was 7.03 percent higher to €90.57.

The tire maker was helped by the Fed’s decision to cut interest rates in the US, which is its biggest market.

There was only one loser on the day on the CAC-40, where eyeglass lens maker Essilor International (Euronext: EF) dropped 0.16 percent to €43.19.

The worst performance on the Dax came from the health care sector as Fresenius Medical Care (FWB: FREG) fell 0.77 percent to €37.29.

European markets were lower on Monday as the subprime crisis continued to cause disturbances.

The FTSE Eurofirst 300 dropped 1.32 percent to 1,487.28.

In Frankfurt, the Dax was 0.24 percent lower to 7,479.83, while Madrid’s IBEX fell 1.18 percent to 13,696.9 and the Paris CAC-40 was down 1.8 percent to 5,439.37.

There were only four gainers on the CAC-40, led by eyeglass lens and frame maker Essilor International (Euronext: EF), which gained 0.53 percent to €43.58.

Drinks group Pernod-Ricard was up 0.23 percent to €152.90.

The other two gainers were both utilities.

Suez (Euronext: SZE; NYSE: SZE) added 0.15 percent to €38.90 and EDF (Euronext: EEN) was 0.46 percent higher to €74.14.

Utilities also saw gains on the Dax, where Eon (FWB: EOA; LSE: EON; NYSE: EON) gained 0.72 percent to €127.11 and RWE (FWB: RWE) was up 1.5 percent to €83.68.

The best performer on the Dax was stock exchange operator Deutsche Boerse, which added 2.73 percent to €82.47.

Big decliners included, in Paris, Alcatel-Lucent (Euronext: ALU; NYSE: ALU; TYO: 6687) with a drop of 5.23 percent to €6.16 and financial planner MLP (FWB: MLP), which fell 3.66 percent to €10.37.

Others seeing declines included Deutsche Post (FWB: DPW; LSE: DPO) with a decline of 1.33 percent to €20.84.

Deutsche Bank (FWB: DBK; NYSE: DB) dropped 2.05 percent to 88.22.

Schneider Electric (Euronext: SCHN) was 5.02 percent lower to €87.83, while STMicroelectronics (Euronext: STM; NYSE: STM) fell 3.08 percent to €11.66.