European stocks were up 2 percent around midday on Thursday, turning positive on the year as banks and insurers surged while a flurry of positive results eased fears over the outlook for corporate profits.
At 1106 GMT, the FTSEurofirst 300 index of top European shares was up 2 percent at 832.79 points, a level not seen since mid-January. The index is on track to record a gain of 13.5 percent in April, its best monthly performance ever.
"This is not a technical rebound but a clear rally. It's a real change in trend; the bear market is behind us," said Francois Chevallier, strategist at Banque Leonardo, in Paris.
"It has been fuelled by what could be a technical recovery in macro data that might not last, but it's enough for stocks to get out of the doldrums."
Investors were reassured by comments from the U.S. Federal Reserve, which said on Wednesday the economic outlook had improved modestly since its last meeting in March, while U.S. GDP data, although grim, showed consumer spending rose and a decline in inventories suggested manufacturers and retailers will have to stock up in merchandise.
Banks and insurers were pacing the gains, with Barclays surging 9.9 percent, UBS up 5.1 percent, Aegon up 16 percent and Banco Santander, which on Wednesday posted forecast-beating results, up 4.2 percent.
AXA, whose CEO reiterated in an interview to French daily Les Echos on Thursday that the insurer has no need for a capital increase, gained 7.5 percent.
NOT MUCH IMPACT FROM FLU OUTBREAK
After worrying earlier in the week about the potential economic impact of the outbreak of the new H1N1 swine flu, investors didn't react negatively to the World Health Organization's decision to raise the official alert level to phase 5, the last step before a pandemic.
"So far, the flu outbreak is limited, and maybe investors see the fact that the WHO has raised its alert level as a sign that authorities are aggressively acting to limit the spread of the virus," said Valerie Plagnol, chief strategist at CM-CIC Securities, in Paris. "We've had the SARS outbreak and the avian flu outbreak. This time, the market is waiting to see if it will really be a pandemic".
The swine flu has spread to nine countries and may have infected more than 2,500 people. It has killed dozens in Mexico and a toddler from Mexico visiting Texas who became the first U.S. death.
Mexican President Felipe Calderon told his people to stay home from Friday for a five-day partial shutdown of the economy.
Across Europe, the FTSE 100 index was up 2.1 percent, Germany's DAX gained 2.5 percent and France's CAC 40 was 1.6 percent higher.
Chemicals giant BASF posted results clearly above expectations, lifting its shares 7.5 percent.
German Wacker Chemie rocketed 15 percent after the silicon maker released strong first-quarter results.
"Overall, today's numbers don't look too bad so far and underscore the positive sentiment that is currently present in the market," said Marcus Silbe, analyst at German brokerage Close Brothers Seydler.
Miners were also on the upside, with Anglo American up 4.7 percent after the company posted a 22 percent rise in first quarter iron ore output on while copper production declined by 5.4 percent.
French carmaker Renault surged 11 percent after the company late on Wednesday posted a drop in first-quarter sales but reaffirmed its focus on generating positive free cash flow in 2009.
Bucking the trend, telecom gear maker Ericsson posted weaker-than-expected first-quarter underlying earnings, sending its shares down 8 percent.
Later in the session, investors will train their sights on U.S. core personal consumption expenditure data as well as weekly jobless figures.
