Europe stocks rise as banks rally after German Ifo

LONDON (MarketWatch)�European stocks finished higher on Friday, with banks gaining ground after a surprise rise in a German business-climate index, while BP PLC lost ground after a fresh oil-spill claims audit.

The Stoxx Europe 600 index XX:SXXP closed up 0.5% at 257.79, after swinging between small gains and losses through most of the session. On a weekly basis the index rose for the first time in five weeks, up 1.7%.

In the U.S., stocks were also higher in recent trade.

�Investors can see they need to take risks in order to get a return on their investments,� said Henrik Drusebjerg, senior strategist at Nordea Bank. �They know that yields on certain government bonds, like Germany�s, can�t compete with the rate of inflation and that�s an incentive to take risk in the hunt for a return.�

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�But markets are fragile in 2012 and as long as the euro zone has such fundamental problems, investors will be nervous and macroeconomic data can easily push stock prices out of course,� he said.

Macroeconomic data provided support. The Munich-based Ifo Institute�s business confidence index unexpectedly rose to 109.9 in April.

The German DAX 30 index DX:DAX rose 1.2% to 6,750.12, and gained 2.5% for the week.

Commerzbank AG DE:CBK added 2.3% and Deutsche Bank AG DE:DBK rose 1.7%.

Chemicals firm BASF SE DE:BAS also supported the index, rising 1.8% to 66.20 euros after J.P. Morgan Cazenove lifted the price target on the stock to �61 from �57 a share.

Banks also gained ground in London. Lloyds Banking Group PLC UK:LLOY LYG advanced 2.8% and Standard Chartered PLC UK:STAN climbed 0.8%.

French election looms

In France, the CAC 40 index FR:PX1 added 0.5% to 3,188.58, buoyed by solid gains for banks. Soci�t� G�n�rale SA FR:GLE rose 3.5% after Bank of America Merrill Lynch lifted the stock to buy from neutral, while BNP Paribas SA FR:BNP took on 3.7% as BofA raised the bank to neutral from underperform. Credit Agricole SA FR:ACA added 2.3%.

Weighing on the French index, hotel chain Accor SA FR:AC dropped 2.3% as Morgan Stanley cut the stock to equal-weight from overweight.

French politics will also be on investors� mind over the weekend as the country heads into its first rounds of presidential elections. Polls predict a tight race between Nicolas Sarkozy and Socialist challenger Fran�ois Hollande, who has vowed to renegotiate the recently signed fiscal compact in Europe. French election stirs fears of euro-zone turmoil

�It can definitely move stock prices. There�s a continued focus in Europe that politicians move in the same direction without hesitation,� Drusebjerg said. �There�s a concern that France won�t complete as many and strong reforms as hoped if Hollande wins and that contradicts with creating a stronger and more competitive Europe.�