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European shares mark fourth week of gains; Ericsson shines

* STOXX up 0.7 this week; ends flat

* Ericsson (Hanover: ERCB.HA - news) top gainer as cost cuts pay off

* Results lift Telia; Reckitt falls (Adds detail, updates prices at close)

By Danilo Masoni and Kit Rees

MILAN/LONDON, April 20 (Reuters) - European shares held steady on Friday at the end of a strong week as a rally in commodities softened, although strong earnings updates boosted shares in Ericsson and Telia.

The pan-European STOXX 600 index ended the session flat in percentage terms but remained up 0.7 percent on the week, its fourth straight week of gains, as global markets recovered from a turbulent first quarter.

Jitters over possible trade wars, faster rate hikes in the United States and a regulatory crackdown on big tech groups sent the STOXX to 14-month lows in March.

But since April the index has been on a recovery path as those worries receded and investors were lured back into equities by cheaper company valuations.

While moves were largely muted at the index level on Friday, Ericsson surged 17.5 percent and posted its biggest one-day gain since October 2002 after the Swedish mobile equipment maker reported first-quarter earnings and its gross margin above market expectations as cost savings from job cuts started to kick in.

Its gains drove shares in rival Nokia (Milan: 23568.MI - news) up 2.4 percent.

"The big jump in profitability provides evidence that Ericsson's efforts at cost reduction, addressing loss making contracts and investing in R&D is paying off," Liberum analysts led by Janardan Menon said in a note.

However, they confirmed their 'hold' rating on the stock, saying overall operating margins continued to be low in an unpredictable industry environment.

Cost-cutting has been a key driver for earnings growth in Europe and could also help first quarter results. Companies on the MSCI EMU index are expected to see earnings rising around 15 percent in dollar terms last quarter.

Elsewhere, dovish remarks overnight from Bank of England Governor Mark Carney weakened the pound, helping the internationally exposed FTSE index outperform with a gain of 0.5 percent. The index weathered a 2.8 percent fall in Reckitt Benckiser (Xetra: A0M1W6 - news) following another poor update that further stresses gloomy prospects for consumer goods makers.

Shares (Berlin: DI6.BE - news) in Shire (Xetra: S7E.DE - news) were the worst FTSE performers, down nearly 4 percent after Botox maker Allergan (Frankfurt: A1W5NE - news) walked away from a bid for the rare-disease drugs specialist.

On Friday, Japan's Takeda increased its offer for the rare-disease drugs specialist to 47 pounds-a-share. Shire (Hamburg: 3979575.HM - news) has rejected Takeda's previous three offers.

Back in earnings, Telia was an outstanding gainer, up 8.6 percent, after the Nordics telecoms group announced a welcome share buyback plan as first-quarter core earnings slightly topped market expectations.

But ASM International dropped 8.4 percent after the supplier of wafer processing equipment for the semiconductor manufacturing industry reported a bigger than expected fall in gross margins.

Shares in Metro (Dusseldorf: 62M.DU - news) were the biggest fallers, down 10.8 percent after the German retailer lowered its earnings outlook due to weak performance at its Russian operations.

Oil stocks, which have gained 2.6 percent this week, were a weak spot on the day as the price of oil fell after U.S. President Trump criticised OPEC for artificially high prices. (Reporting by Danilo Masoni and Kit Rees Editing by Andrew Heavens)