European stocks staged a sharp rally on Thursday as a solid outlook from bellwether Nokia and surprisingly strong results from JPMorgan spurred a relief rally led by the banking sector.
The FTSEurofirst 300 index closed 2.7 percent higher at 1,145.87 points, after brushing an intra-day high of 1,154.72 earlier in the session. The day's advance was the largest since April 1.
Yet analysts and strategists were uncertain whether Thursday's rally marked a significant turnaround.
"The banks have fallen so much recently that you have to wonder whether they are overdone," strategist Bernard McAlinden at NCB Stockbrokers in Dublin said.
"The interesting thing is that if you look at U.S. banks during the past 30 to 35 years then banks are now as low as they have been," he added, noting: "This may be a very advanced long-term clue that the worst may be over."
Banks rebounded from early in the session with the DJ Stoxx European banks index soaring 5.4 percent, supported by unexpectedly strong results from JPMorgan .
UBS rose 7.9 percent, Deutsche Bank gained 6.9 percent and BNP Paribas was up 6.1 percent.
Tech stocks were also in the spotlight after Finnish handset maker Nokia raised its outlook, although analysts agreed that the rest of the bellwether's earnings report showed a mixed picture.
The average selling price (ASP) for handsets was below forecasts and earnings per share were disappointing.
"It's normally very negative when ASP and margins fall short of expectations, but sentiment was so negative that it is now enough for them to say that the market is growing," analyst Nicolas von Stackelberg at Sal Oppenheim said.
The stock added almost 8 percent, with peers Ericsson and Alcatel-Lucent rising 6.2 and 1.9 percent respectively.
Ericsson will be in focus on Friday when its joint venture with Sony reports.
Nokia's outlook also led to a rally in supplier semiconductor stocks such as Infineon, up 9.6 percent and ARM Holdings, up 14.3 percent.
The tech sector as a whole clocked up 5.5 percent.