Euro Stocks Rally, Led by Banks, Miners

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

Volvo surged 16 percent 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 rose 2 percent to close at 826.37, posting a gain for the week of 3.7 percent.

U.S. employers slashed 598,000 jobs in January, the deepest cut in payrolls in 34 years as the unemployment rate rose to 7.6 percent, signaling a deepening economic slowdown.

"The markets have, to a certain extent, 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 percent and Deutsche Bank adding 5.7 percent.

Shares of mining companies were among the biggest gainers, climbing along with metal prices on hopes of a recovery in demand. Xstrata rose 6 percent and Anglo American gained 6.2 percent.

"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 percent so far in 2009, after tumbling 45 percent 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 percent in 2008, is up 20 percent 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 percent after it posted results that reassured investors.

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

German car maker BMW rose 12 percent after the company released key figures for the year 2008 and said it 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 on Friday, with GDF Suez losing 5 percent and GlaxoSmithKline down 1.5 percent.

Around Europe, the UK's FT-SE 100-share index gained 1.5 percent, Germany's Xetra Dax index index rose 3 percent, and France's CAC 40-share index added 1.8 percent.

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