* FTSEurofirst 300 up 0.9 pct; hits highest close in 5 mths
* Banks lead gains; sector up 118 pct since early March
* Defensives stocks catching up in cyclical-led rally
* For up-to-the-minute market news, click on []
By Blaise Robinson
PARIS, June 11 (Reuters) - European equities ended at their
highest close in five months on Thursday, propelled by buoyant
banking stocks, as U.S. macro data showing the recession was
abating helped shares extend their sharp three-month rally.
Data showed sales at U.S. retailers rose in May for the
first time in three months, and the number of workers filing new
applications for jobless benefits fell for a fourth straight
week last week. []
The FTSEurofirst 300 <> index of top European shares
ended 0.9 percent higher at 887.78 points, the index's highest
close since Jan 6.
Thursday's rally was led by banking shares, such as HSBC
<HSBA.L>, UBS <UBSN.VX>, Barclays <BARC.L> and BNP Paribas
<BNPP.PA>, up 2.2-5.6 percent.
But sectors seen as defensive such as utilities, pharma and
telecoms -- shunned by investors during most of the spring rally
-- were also on the rise, with Vodafone <VOD.L> up 2.5 percent,
Roche <ROG.VX> up 1.9 percent and E.ON <EONGn.DE> up 1.3
percent.
"Cyclical stocks are now priced at valuation levels that we
usually see at mid-cycle. That's premature because the economic
activity is still in bad shape," said Chicuong Dang, equity
analyst at KBL Richelieu, in Paris.
"Meanwhile, valuation multiples in sectors such as telecoms
and utilities are still very attractive."
Around Europe, UK's FTSE 100 index <> gained 0.6
percent, Germany's DAX index <> rose 1.1 percent, and
France's CAC 40 <> added 0.6 percent.
Auto stocks gained ground, with Daimler <DAIGn.DE> up 2.7
percent and BMW <BMWG.DE> up 1.2 percent. French car parts maker
Valeo <VLOF.PA>, upgraded to "buy" by Merrill Lynch, surged 8.5
percent.
Among the few stocks on the downside, Carrefour <CARR.PA>
lost 3.7 percent, dragged lower by market talk that the retailer
could lower its profit outlook, according to traders. Carrefour
declined to comment.
LOSING STEAM?
The FTSEurofirst 300 has risen 38 percent since reaching a
record low in early March, as better-than-feared macro data
fuelled recovery hopes.
The sharp rebound has been led by banks <.SX7P>, up 118
percent over the past 3 months, and basic resources <.SXPP>, up
85 percent, while sectors seen as defensive have lagged behind,
with telecoms <.SXKP> up only 6 percent and healthcare <.SXDP>,
up 13 percent.
But a number of analysts and fund managers warn we could see
a period of consolidation after the recent sharp gains because,
despite a few "green shoots", there is still a lack of
visibility on the outlook for the world economy.
"Equities, credits and commodities, government bonds have
had a torrid time," said Paul Niven, F&C's head of asset
allocation.
"From here, with valuation broadly fair and limited scope
for upside surprises in economic and corporate newsflow, we see
the risks on equities and credits as much more finely balanced,"
Niven wrote in a note.
So far this year, UK's FTSE 100 index <> is up 0.6
percent, Germany's DAX index <> up 6.2 percent, and
France's CAC 40 <> up 3.6 percent.
"The stabilisation of the macro situation we see through
data is now priced in. To move higher from here, we need real
signs of improvement, but they haven't come yet," said KBL
Richelieu's Dang said.
(Reporting by Blaise Robinson; Editing by Hans Peters)
