European markets spring back

PARIS, France (Reuters) -- European stocks bounced back on Thursday, as stellar results from companies such as Nokia, Societe Generale and Unilever distracted investors from recent worries of a credit market crunch.

European Central Bank president Jean-Claude Trichet's comments that "strong vigilance" was needed to stem inflation risks, signaling a possible rate hike in September, did not dent the rally.

The pan-European FTSEurofirst 300 index closed 0.64 percent higher at 1,536.03 points, bouncing back from a 1.5 percent drop in the previous session.

Tech stocks were among the biggest gainers, with Nokia jumping 8 percent to reach a five-year high after the world's largest cell phone maker posted better results than expected.

"It's clearly an earnings-driven market," said Bert Jansen, an equity strategist at Exane BNP Paribas in Paris. "The best sectors are tech stocks, up on Nokia's earnings, and the telecoms, rising on better-than-expected results from France Telecom."

France Telecom added 3 percent after the fixed-line and wireless telecoms group posted half-year underlying earnings boosted by robust mobile sales in emerging markets.

Banking stocks also gained ground, paring sharp losses in the past two weeks, on forecast-beating results and comments by executives that banks see little impact from the turmoil in the credit markets.

Societe Generale gained 4.3 percent after beating profit estimates as it benefited from the sale of shares in the Euronext bourse operator, while Credit Suisse gained 0.7 percent after unveiling a surprise 48 percent jump in second-quarter net profit.

Credit Suisse's CFO played down problems in the global leveraged-finance business, which drives a significant chunk of its investment banking revenues, and said the bank had seen the subprime crisis coming.

On the macro front, the European Central Bank and the Bank of England kept their interest rates unchanged at 4 percent and 5.75 percent respectively, decisions that were widely expected.

The market trimmed gains late in the session, after U.S. mortgage lender Accredited Home Lenders Holding Co., a subprime lender in the process of being sold, raised concern about its ability to stay in business.

Equity markets worldwide have been hit by worries that the debacle in the U.S. risky subprime mortgage market could have ripple effects on the broader economy.

"It does not matter whether we are talking about today's (Bank of England and European Central Bank) rate decisions, or tomorrow's payroll data from the U.S., the market still has credit market concerns slap bang in the middle of its radar screen and no data or policy decision will knock it off," Bear Stearns analysts wrote in a note.

European shares fell 1.5 percent on Wednesday as more casualties surfaced in the subprime crisis, which has led to sharp losses at hedge funds and a widening of spreads on low-rated credit, making takeovers by private equity firms costlier.

Around Europe, both Germany's DAX index and Britain's FTSE 100 index gained 0.8 percent on Thursday, while France's CAC 40 added 0.5 percent.

McAlpine surged 6 percent after the British support services and construction firm said it plans to demerge its core business and create two separate listed companies.

On the downside, oil and gas giant Total slipped 2.3 percent, the biggest laggard on the CAC 40, after quarterly production growth figures disappointed the market.

Germany's IKB, a lender to small and mid-sized companies, tumbled 29 percent despite a bail-out plan agreed by other German banks to cover IKB's expected losses from its exposure to the U.S. subprime mortgage market. E-mail to a friend

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