* FTSEurofirst 300 index finishes 1.8 pct higher
* Cyclical stocks advance on trade data from China
* Industrial shares underperform, outlook negative
By Atul Prakash
LONDON, April 10 (Reuters) - European shares hit a one-week
closing high on Wednesday and posted their biggest daily rise in
three months, after encouraging Chinese economic data and a
record high on a leading U.S. equity index.
Sectors that generally perform better on signs of
improvement in economic activity were the top gainers, with
banking, autos, construction and mining stocks all surging after
data showed a surprisingly big rise in imports in China, the
world's second-largest economy.
That raised expectations that domestic demand was gathering
the steam needed to drive a recovery in the economy, which in
turn would help the global economy to gather momentum.
The FTSEurofirst 300 index ended 1.8 percent firmer
at 1,186.17 points, the highest close since April 3 and the
biggest one-day gain in three months, also helped by the U.S.
S&P 500 index's rise to a new all-time high.
Some analysts said the European share moves on Wednesday
were a knee-jerk reaction to the Chinese numbers and that the
medium-term outlook for stocks remained challenging.
"China's import figures show the economy is doing well.
These numbers are quite positive for the market in the short
run, but its impact, especially on commodity stocks, will be
neutral in the medium term," said Christian Stocker, equity
strategist at UniCredit in Munich.
"We are in a volatile environment and the focus is on
earnings. In Europe, we are cautious on the earnings reports of
industrial companies, which have a negative outlook because of
poor growth in the region and low industrial production."
The STOXX Europe 600 Industrial Goods & Services index
rose 2 percent but underperformed several cyclical
sectors such as banks, up 3.5 percent, insurance
, up 2.8 percent, and autos, up 2.6 percent.
"We have just downgraded industrials on the basis that the
March data prints in Europe were disappointing. You need to have
a more balanced approach to the markets at the moment, rather
than be full on outright cyclicals," said Graham Bishop, senior
equity strategist at Exane BNP Paribas.
However, Wednesday was a winning day for cyclicals. A strong
gain in financials also on the back of Japan's aggressive
monetary easing policy and a potential extension of loans to
debt-stricken Ireland and Portugal helped several regional
indexes to outperform the wider market.
A 4.3 to 7 percent jump in Spanish banks such as Bankinter
, BBVA, Banco Popular and Santander
helped the country's benchmark share index to
advance 3.4 percent, while Italy's FTSE MIB was up 3.2
percent on stronger banks and auto stocks.
HEADING FOR PROFIT-TAKING?
The euro zone's blue chip Euro STOXX 50 index
gained 2.6 percent to 2,661.62, with the index closing just
above its 50-day moving average, prompting some investors to
advise caution in the near term.
"Along with most other leading indices, the Euro Stoxx 50
has found solid support. But I expect the rally to start losing
momentum over the coming few days once profit-taking takes
hold," said Fawad Razaqzada, technical analyst at GFT Markets.
Some analysts argued the stock market's longer-term outlook
remained positive. Liquidity injected by central banks across
the world was a dominant driver and equity valuations are not
yet a problem for the market, they said.
The price to earnings ratio for the Stoxx Europe 600
index has gradually moved higher in the past months to
11.76 now but is still below its long-term average of 12.18 and
13.5 times one-year forward earnings for the S&P index.
Percival Stanion, head of asset allocation at Baring Asset
Management, said he had become overtly positive on risk assets
and was getting more confident in the resilience of the U.S.
"In Europe, the situation is still challenging but there are
signs of a tepid recovery - the banking sectors in South Europe
are beginning to show signs of normality. Even countries like
Ireland are beginning to see the markets open up to funding."