European stocks rallied on Friday, ending a roller-coaster week on a positive note as investors bet that measures to stop contagion from the Greek debt crisis will soon be unveiled at EU summits. Cyclical and financial stocks led the rally, with miner Xstrata up 6.2 percent and bank Societe Generale up 5.6 percent.
"People are afraid of being caught on the wrong side before the meeting. It's a rumour-driven market, clearly not controlled by long-only guys and there's a risk of hangover next week," Kepler Capital Markets Patrice Perois said. The FTSEurofirst 300 index of top European shares closed 2.5 percent higher at 978.13 points, the index's biggest one-day rise in two weeks, though volumes were relatively thin, signalling a lack of conviction from buyers.
The index eked out a gain of 0.3 percent on the week, adding to three weeks of brisk gains. Despite Friday's renewed investor optimism over a solution to the eurozone debt crisis, senior European sources said Berlin and Paris were still at loggerheads on two core elements of the plan: how to scale up the European Financial Stability Facility (EFSF), and how to cut Greek debt.
The rift between Europe's two biggest powers has prompted leaders to announce an extra summit in the coming week. They will now meet twice, on Sunday and Wednesday. "The bottom line is: even if they agree on a plan for the EFSF and the banks, it won't change the fact that Germany's growth is slowing and France has to slash its growth forecast, with its triple-A rating clearly in danger," Perois said.
Around Europe, UK's FTSE 100 index rose 1.9 percent, Germany's DAX index gained 3.6 percent and France's CAC 40 added 2.8 percent. On the week, the CAC 40 lost 1.5 percent, underperforming the other European benchmark indexes, hurt by mounting concerns over France's ability to preserve its triple-A credit rating.
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