Europe shares gain on economic data, bank tests

                                
 * FTSEurofirst 300 up 1 pct; highest close since late June.
                                
 * Banks advance as more details on stress tests emerge
                                
 * Positive earnings outlook, encouraging data helps market
                                
 By Atul Prakash
                                
 LONDON, July 8 (Reuters) - European shares hit their highest
in more than a week on Thursday as encouraging economic numbers
tempered concern about the global economic recovery, while banks
surged as more details of the sector's stress tests emerged.
                                
 Positive earnings updates from some companies also improved
sentiment and appetite for risky assets rose, with the VDAX-NEW
volatility index <.V1XI> falling to its lowest in more than two
weeks. The lower the index, the more the market desire for risk.
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
ended 1 percent up at 1,015.56 points, the highest close since
late June. It ended higher for a third straight session after
falling more than 7 percent in the previous two calendar weeks.
                                
 "It was too far too fast on the downside. The market has now
priced in the negative news flow and uncertainty," said
Giuseppe-Guido Amato, strategist at Lang & Schwarz in Frankfurt.
"Another trigger is positive expectations for the Q2 figures."
                                
 Danish group A.P. Moller-Maersk <MAERSKb.CO> upgraded its
earnings guidance for the full year, while Primark owner
Associated British Foods <ABF.L> said third-quarter sales jumped
13 percent, boosting their shares 3.7 percent and 1.5 percent,
respectively. [ID:nLDE66514Y]
                                
 According to Thomson Reuters data, quarterly earnings of S&P
500 companies are expected to rise 27.1 percent in the second
quarter after surging 58.3 percent in the first quarter.
                                
 Macro-economic data helped in soothing sentiment, hurt in
the past weeks on a series of poor U.S. economic numbers, from
housing to jobs.
                                
 Figures showed new U.S. claims for unemployment benefits
fell more than expected last week to their lowest level in two
months, offering cautious hope for the economic recovery that
had shown signs of fatigue. 
                                
 Several top U.S. retail chains reported better-than-expected
June same-store sales, while German trade surged in May and
industrial output jumped more than expected, fuelling hopes
Europe's largest economy may have posted its strongest growth in
over two years in the second quarter. [ID:nN08209499]
                                
 European Central Bank President Jean-Claude Trichet,
however, said the bank expects the euro zone's economic recovery
to be moderate and uneven. The market showed little reaction
after the ECB and the Bank of England both held interest rates
on hold, as widely expected. [ID:nLDE6670DA]
                                
 The Euro STOXX 50 <.STOXX50E> rose 1.2 percent to 2,666.42
points, hovering near a key resistance level at 2,669.29, the
38.2 percent retracement level of the index's move to a May low
from an April high. 
                                
 Around Europe, Britain's FTSE 100 index <.FTSE>, Germany's
DAX <.GDAXI> and France's CAC 40 <.FCHI> rose 0.7-1.8 percent.

                                
 BANKS
                                
 Banks were the top gainers, with the STOXX Europe 600
banking index <.SX7P> up 1.7 percent. Barclays <BARC.L>, Lloyds
<LLOY.L>, BNP Paribas <BNPP.PA> and Societe Generale <SOGN.PA>
rose between 3.2 and 4.3 percent.
                                
 "With many speculating that there will be no surprisingly
bad news from European bank stress tests, investors appear to
have got their risk appetite back when it comes to the financial
sector and this wave of optimism has helped keep this a
broad-based rally," said Yusuf Heusen, senior trader at IG
Index.
                                
 The Committee of European Banking Supervisors, conducting
the tests, has said 91 banks across Europe were taking part,
including many regional banks, seen as the weakest. However, it
has yet to release certain key details about the tests.
                                
 "When the market has been oversold and you're faced with an
event which you are not sure about, it is wise to buy the market
as you could be sitting on a nice profit," said Philippe
Gijsels, head of research at BNP Paribas Fortis Global Markets.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a Take-a-Look on stress tests:     [ID:nLDE6601T6]
For a Take a Look on outlook for markets: [ID:nLM7620]
For Breakingviews column on the tests: [ID:nLDE6670DZ]
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 (Additional reporting by Blaise Robinson in Paris; editing by
Simon Jessop)