UK markets closed

Risk-on shift sends European shares near 2-month highs

* Hopes in dovish Fed

* Tech optimism continues

* Market shrugs off negative German data

* Vodafone hits July 2010 lows after trading update (Adds closing prices)

By Josephine Mason

LONDON, Jan 25 (Reuters) - European shares on Friday hit their highest level in nearly two months as positive earnings, hopes of accommodative U.S. monetary policies and higher oil and metal prices help fuel a global rally.

The pan-European STOXX 600 index ended the day up 0.6 percent near two-month highs, scored a fourth straight week of gain and was on course for its best month since October 2015.

Frankfurt's DAX was the top performer with a 1.4 percent rise while Britain's exporter-heavy FTSE 100 underperformed as a stronger sterling weighed.

Traders cited a Wall Street Journal report which said Federal Reserve officials were considering maintaining a larger portfolio of Treasury securities than earlier expected as a reason for better risk sentiment.

"Economic sentiment has been deteriorating for a while now but the difference between now and December is that central banks are reacting to it", said Mizuho rates strategist Antoine Bouvet (LSE: 0HDU.L - news) .

"That's what is leading to this improving risk tone", he argued, adding that "the risk of unwarranted tightening of conditions is lower."

Investors also shrugged off a key German business morale indicator highlighting the deteriorating health of the euro zone.

The European tech sector hit its highest level since Nov. 12 after an overnight chipmakers' rally on Wall Street led by higher than expected results in the sector.

The sector has been hit hard by fears about stagnating smartphone demand and a cooling Chinese economy after sales warnings from Apple (NasdaqGS: AAPL - news) , Samsung and Taiwan Semiconductor earlier this month.

Car (HKSE: 0699-OL.HK - news) makers and parts suppliers, which are sensitive to trade frictions and the health of the Chinese economy, were also strong performers, up 2.3 percent.

Telecoms were among the few sectors in the red after disappointing results from Vodafone and Nordic telecom group Telia.

Vodafone was down 4.9 percent, hitting its lowest in nearly nine years after the world's second-largest mobile operator said revenue growth slowed in the third quarter due to ongoing price competition in Spain and Italy and a slowdown in South Africa.

The stock was knocked hard on Thursday after its South African unit issued disappointing results.

Telia was down 4.6 percent, at the bottom of the STOXX 600 after its weaker-than-expected results. (Reporting by Josephine Mason, Abhinav Ramnarayan and Julien Ponthus Editing by Gareth Jones, Andrew Cawthorne, William Maclean)