Bank shares propel Europe higher

LONDON (Reuters) -- European shares climbed in early trade on Friday as financial stocks advanced after the results of stress tests on U.S. banks showed no nasty surprises, while commodities tracked higher crude and metals prices.

At 0758 GMT, the FTSEurofirst 300 index of top European shares was up 1.2% at 861.50 points. The index closed 0.8% lower in the previous session after hitting a four-month high of 878.08.

Royal Bank of Scotland (RBS) surged 13.5%. The part-nationalized lender fell to a small first-quarter loss after bad debts quadrupled and it took another $3.2 billion writedown on risky assets, but traders said the results contained no surprises.

Commerzbank rose 3.7% after it unveiled a revamped board structure and restructuring program, and reported a bigger-than-expected net loss.

Other banks were also up, with Lloyds (LYG) rising 5.8%, BNP Paribas up 3.8%, Natixis gaining 4.3% and Deutsche Bank (DB) advancing 3.7%.

Investors breathed a sigh of relief after the results of stress tests, which were not as bad as expected, and looked ahead to U.S. employment data that may offer further hope the global slump is bottoming out.

U.S. regulators ordered top banks to raise nearly $75 billion in capital -- a sum analysts see as relatively modest -- to bolster their ability to withstand further shocks to the financial system.

"This (stress test results) could be seen by many as the last hurdle for the markets to continue their stellar bull run," said Chris Hossain, senior sales manager at ODL Securities Ltd.

"These requests for more cash are only for worst case scenarios -- whilst it might still be too early to call the end of the recession, the first quarter appears to have seen credit markets easing and confidence returning."

Sentiment also improved after German exports unexpectedly rose for the first time in six months in March, preliminary Federal Statistics Office figures showed.

The International Monetary Fund said recent economic data from China was "very encouraging" but more data for the months ahead was needed to determine whether the rebound was sustainable.

Miners tracked metals prices, with copper jumping 2.5%, nickel up 2.6% and zinc gaining 1.5%. BHP Billiton (BHP), Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose between 0.9 and 4.8%.

A 1.6% rise in crude oil prices supported energy stocks. BP (BP), Royal Dutch Shell, BG Group, Tullow Oil, Repsol, Total and StatoilHydro added between 1 and 3.6%.

Spanish oil major Repsol rose 1.9% after it posted clean operating profit at current cost of supply of €746 million, beating estimates for €698 million from a Reuters poll of eight analysts.

However, Spain's Endesa fell 0.9% after the company said its net quarterly profit fell 23%. Its earnings before interest, taxes, depreciation and amortization (EBITDA) rose 6% to $2.3 billion.

Investors awaited U.S. jobs data, due out at 1230 GMT. Economists polled by Reuters are expecting to hear that 590,000 jobs were lost in the United States in April compared with a loss of 663,000 in the previous month.

Across Europe, the FTSE 100 index, Germany's DAX and France's CAC 40 were between 1.1 and 1.5%.