European shares gain

European shares closed out their best week in a month on a high note on Friday as buoyant German business sentiment and UK retail sales data provided a welcome distraction from the euro zone debt crisis. Better-than-expected results from Microsoft and General Electric gave the mood, already lifted by Thursday's closely scrutinised Spanish sovereign debt auction which met solid demand, a further boost.
Data on Friday showed German business sentiment rose unexpectedly for the sixth month in a row in April, whilst British retail sales saw their biggest rise in more than a year in March. In evidence of diminished investor nervousness, European share index volatility, as measured by the Euro STOXX 50 Volatility index, or VSTOXX, shed 7.3 percent on the day.
The pan-European FTSEurofirst 300 index closed up 0.5 percent at 1,046.08 points, with Spain's IBEX 35 index up 1.9 percent. Charts showed the FTSEurofirst 300, in a positive sign, is holding above the 38.2 percent Fibonacci retracement level of the rally from the low in November to the high in March.
The index rose 1.8 percent over the week, though this offset just a fraction of the losses of around 7 percent over the past four weeks on fears of a resurgence of the euro zone debt crisis as concerns over Spain's public finances intensified. "Europe isn't one of our preferred equity markets just because we see better value elsewhere," Frances Hudson, global thematic strategist at Standard Life Investments, said.
"The trouble is that the periphery is just bubbling along and posing worry on a day-to-day basis." Spanish 10-year yields topped 6 percent on Friday before going into retreat after the upbeat German data, but worries about Madrid's ability to deal with its fiscal problems made a break higher seen as likely.
"Overall I'm really very bearish for these markets," David Morrison, market strategist at GFT Global, said. "I don't really see how Europe can untangle its mess in any shape or form. It can't be done neatly - you can just try and postpone the day of judgement really. At some stage we'll just hit a brick wall."
Investors were looking ahead to a key International Monetary Fund meeting this weekend. The IMF's bid to win a big boost in funding to handle the euro zone debt crisis has hit a speed bump as Brazil has demanded more power at the IMF for emerging economies as a condition for lending it extra cash.
Insurers led the market higher on Friday after a bullish note from Jefferies on the sector, which it says boasts encouraging capital generation growth, with some firms benefitting from scale of operations and innovative practices. France's AXA and UK-listed Aviva, top picks for the broker, enjoyed respective gains of 3.6 percent and 2 percent.
Buyers also came in for banks, again aided by upbeat broker comment, with French lenders BNP Paribas and Societe Generale up 3.7 and 3.5 percent as BofA Merrill Lynch lifted its ratings for the pair on valuation grounds. Britain's Lloyds Banking Group, meanwhile, advanced 2.8 percent as Investec Securities repeated its "buy" rating on the part state-owned lender. "Not only is Lloyds increasingly adopting a 'warts and all' approach to disclosure, much of the sell-side froth has come out of near-term consensus expectations too," Investec said in a note.