European shares firm, Irish stocks hit highest close in six months

By Aaron Saldanha

(Reuters) - European shares rounded off a solid week on Friday, as better than expected German and U.S. data bolstered risk appetite, while Irish stocks surged to their best closing level in nearly half a year amid a possible delay to Brexit.

Hopes of a U.S.-China trade deal also aided sentiment.

Data showed a narrower French trade deficit and a rise in German industrial output in February, while U.S. employment in March accelerated from a 17-month low.

The pan-region STOXX 600 index edged up 0.1 percent, as most bourses across Europe rose.

"We are in a Goldilocks scenario, where bad news is good news, and the good news is good," said Naeem Aslam, chief market analyst at TF Global Markets in London. "The U.S. jobs number was solid and this has pushed the European markets higher."

The STOXX 600 perked up after the data to briefly touch levels last seen in August.

Guy Foster, head of research at Brewin Dolphin, said the equity rally "does have legs".

"There's a chance that we're in the foothills of recession but I don't think we are," he added.

Britain's FTSE 100 rose 0.6 percent, after the pound weakened against the dollar due to uncertainty around British Prime Minister Theresa May's attempt to delay Brexit.

Many firms in the index rely on overseas profits, and their value swells on a weaker pound.

In neighbouring Ireland, stocks rose 1.1 percent.

"Irish stocks were under pressure recently and it has been overly priced in that a no-deal Brexit is going to happen," CMC Markets analyst David Madden said, adding that the rise was "more of a relief rally for Irish stocks."

Germany's DAX rose 0.2 percent.

Hopes that the U.S.-China talks would yield a trade truce have been a major driver for European stocks this week with auto stocks performing especially strongly. They consolidated gains to rise 6.9 percent for the week.

U.S. President Donald Trump said on Thursday a deal with China could be announced within four weeks.

Chemicals stocks helped prop up the regional benchmark on Friday, with Switzerland's Ems Chemie Holding climbing 5.9 percent after beating a first-quarter net sales target.

A 0.6 percent rise in oil prices supported European oil and gas stocks, which rose 0.9 percent. Britain's BP gained 1.6 percent, while Norway's Equinor added 1.2 percent.

Morgan Stanley's recommendation to buy oil field services firms helped France's TechnipFMC, which rose 3.9 percent.

Telecom stocks fell 1 percent, with Vodafone ending down 2.2 percent.

Banks were also weak, falling half a percent.

More complications arose for a possible merger of Deutsche Bank and Commerzbank. The European Central Bank will ask Deutsche Bank to raise fresh funds before it gives the go-ahead for a deal, a source told Reuters.

The demand could complicate a bid to create Europe's third-largest bank out of Germany's top two lenders, which have struggled to recover since the financial crisis.

Commerzbank shares rose 1.7 percent, while those of Deutsche bank slipped 1.2 percent.

Zurich Insurance Group AG shares dropped 4.4 percent as they traded ex-dividend.

(Reporting by Aaron Saldanha, Muvija M and Josephine Mason in London; Additional reporting by Medha Singh in Bengaluru; Editing by Edmund Blair)