LONDON, Oct 29 (Reuters) - European shares closed sharply higher on Thursday after data confirmed that the United States had emerged from recession.
The FTSEurofirst 300 index of top European shares rose 1.8 percent to a provisional close of 997.61 points after hitting a three-week low of 974.50 points earlier.
The European benchmark is up more than 54 percent from its lifetime low of March 9, as investors have become more confident on the prospects for economic recovery.
France, Germany and now the United States have come out of recession.
"The GDP growth has taken an element of uncertainty out of the market," said Bob Parker, vice chairman of asset management at Credit Suisse. "It confirms that the recession in America is over and that is pulling cash back into the market."
"I don't think this is going to be the start of a major rally. There is a concern about what happens when central banks pursue exit strategies and take liquidity out of the market."
The U.S. economy grew in the third quarter for the first time in a year as consumer spending and investment in new home-building rebounded, unofficially ending the worst recession in 70 years.
The Commerce Department, in its first estimate of third-quarter gross domestic product, said the economy grew at a 3.5 percent annual rate, the fastest pace since the third quarter of 2007, and compared with market expectations for a 3.3 percent growth rate. surged 17.7 percent after tumbling for three consecutive sessions following ING's announced capital increase and the spin-off of its insurance business. The EU-imposed break-up and retrenchment of Dutch ING sparked fears that others could face tougher-than-expected sanctions in return for state aid. ING shares rose 7.9 percent.
Some of the world's leading banks warned that bad debts could rise further in Europe next year, overshadowing an improvement in underlying earnings.
Lloyds rose 7.5 percent after inched closer to plugging a capital gap of more than 20 billion pounds ($33 billion), boosting the British bank's shares on prospects a deal, enabling it to stay out of a government-backed asset insurance scheme, could happen before the year end.
Banking index heavyweights to gain, following weakness in recent days, included Banco Santander, HSBC, and Societe Generale, which were up between 1.4 and 6.5 percent. (Reporting by Brian Gorman)