Financial stocks lead European shares higher
* FTSEurofirst up 0.7 pct, Euro STOXX 50 up 0.6 pct
* New signs of China growth boosts equities
* Banking index is best-performing equity sector
* Concerns linger over Italian election
LONDON, Feb 8 (Reuters) - European shares rose on Friday, recovering from a fall the previous session, as strong Chinese trade data nurtured hope that the global economy will strengthen and fuel demand for equities.
The pan-European FTSEurofirst 300 index rose 0.7 percent to 1,155.94 points by around midday, bouncing back from a 0.3 percent fall on Thursday that sent it to its lowest close since Dec. 31.
The euro zone's blue-chip Euro STOXX 50 index advanced 0.6 percent to 2,613.76 points.
Chinese exports grew 25 percent in January from a year earlier versus a Reuters poll forecast of 17 percent, while imports climbed 28.8 percent, highlighting robust domestic demand.
The new signs of growth in China, the world's biggest consumer of metals, boosted mining stocks and financial shares which are sensitive to the health of the global economy.
"The sentiment is there for the market to go higher," said Caroline Vincent, European equities fund manager at Cavendish Asset Management.
The STOXX Europe 600 bank index was the best-performing European equity sector, rising 1.6 percent, while French bank Credit Agricole topped the FTSEurofirst 300 leaderboard with a 4.2 percent gain.
Vincent said she was growing more positive towards the European bank sector after some encouraging results from its companies, with Danske Bank reporting profits above forecasts this week
"I was 'underweight' on the banks but I'm gradually moving into a more 'neutral' position. Some of the results that have been coming out from the banks have been pretty good," she said.
NEAR-TERM SIDEWAYS MARKETS?
Many investors have switched to shares relatively cheaply on days when stocks have fallen, as fund managers have looked to move out of bonds and into higher-yielding equities.
This has prevented any bigger and more sustained drops on equity markets.
However, some traders have said uncertainty over the outcome of Italian elections this month and persistent weakness in the euro zone economy due to the region's sovereign debt crisis could prevent markets from moving much higher soon.
Mike Turner, European equity options broker at XBZ Ltd, said the Euro STOXX 50 index could trade sideways this month.
"We're still very much rangebound. I think we're likely to go into a congestion period," he said.
Central Markets senior broker Joe Neighbour recommended a "pairs trade" to go short on Germany's DAX while going long on the U.S. S&P 500, essentially betting on a fall on the DAX and a rise on the S&P 500.
Neighbour also noted that German Chancellor Angela Merkel faces a tough challenge in elections later this year.
"Euro zone risks remain on the agenda with the Italian election this month, while Merkel is also going to have a fight on her hands to win the German election," he said.
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