European stocks end up as investors brush off bleak data

European stocks ended higher on Friday, rallying along with US stocks as investors brushed aside grim US monthly jobs data and scooped up recently-beaten-down shares of banks and miners.

World No. 2 truck-maker Volvo surged 16 per cent despite posting an operating loss in the fourth quarter amid slowing orders, as investors were relieved the company was still able to generate cash in the quarter.

The FTSEurofirst 300 index of top European shares closed two per cent higher at 826.37 points, posting a gain for the week of 3.7 per cent.

Around Europe, UK's FTSE 100 index gained 1.5 per cent, Germany's DAX index rose three per cent, and France's CAC 40 added 1.8 per cent.Data issued yesterday showed US employers slashed 598,000 jobs in January, the deepest cut in payrolls in 34 years as the unemployment rate rose to 7.6 per cent, signalling a deepening economic slowdown.

"To a certain extent the markets have already written off pretty much the first half of 2009 as ugly for jobs, but we will need to see some evidence soon that all the fiscal stimuli are having an effect," said Martin Slaney, head of derivatives at GFT Global Markets, in London.

Banks gained ground, with Royal Bank of Scotland rising 9.1 per cent and Deutsche Bank adding 5.7 per cent.

Shares of mining companies were among the biggest gainers, climbing along with metal prices on hopes of a recovery in demand. Xstrata rose six per cent and Anglo- American gained 6.2 per cent.

"People have been very gloomy. But now we're getting signals that things are not that bad after all in some economic areas and for some companies," one Paris-based trader said.

"The focus is now on the early cyclicals, these stocks are at relatively attractive levels. If we get a market rally, it won't be driven by defensive stocks."

Despite Friday's rally, the FTSEurofirst 300 is still down 0.7 per cent so far in 2009, after tumbling 45 per cent last year, hit by a credit crisis that has tipped the world economy into a sharp downturn and forced governments to rescue a number of struggling financial institutions.

The DJ Stoxx basic resources index, which tumbled 65 per cent in 2008, is up 20 per cent so far this year, buoyed by hopes that the raft of economic stimulus plans unveiled around the world will revive demand for commodities.

Also on the upside, shares in luxury goods group LVMH surged 13 per cent after it posted results that reassured investors.

German chip maker Infineon was also up 13 per cent after the company unveiled an outlook that was less bleak than its peers'.

German car maker BMW rose 12 per cent after the company released key figures for 2008 and said it had met its reduced outlook for a clear 2008 profit.

Stocks seen as defensive plays in a recessionary environment - utilities and pharmaceuticals - were on the downside yesterday, with GDF Suez losing five per cent and GlaxoSmithKline down 1.5 per cent.