(Reuters) - European stock markets ended higher on Friday, with the resilience of the US labor market fuelling optimism about the economic outlook, although it tempered expectations of a rate cut from the Federal Reserve.

In Paris, the CAC 40 ended up 1.26% at 7,432.93 points. The British Footsie gained 0.98% and the German Dax 1.44%.

The EuroStoxx 50 index gained 1.23%, the FTSEurofirst 300 1.02% and the Stoxx 600 1.07%.

Over the week, the Stoxx 600 lost 0.30% and the CAC 40 0.78%, both indices recording their second weekly loss in a row.

While concerns about the health of the US banking sector persist, the latest US employment report published on Friday showed a larger-than-expected increase in job creation in April, helping to ease markets at the end of a week marked by interest rate hikes by the Fed and the European Central Bank (ECB).

Widely followed by investors, the report showed 253,000 nonfarm jobs created last month, while economists and analysts polled by Reuters were forecasting an average of 180,000.

"In the past, we've seen a very positive jobs report drag the market down, but today the market is holding on to its gains, thinking that the glass is half full, that a soft landing is possible and that a recession isn't as imminent," said Gina Bolvin, president of Bolvin Wealth Management Group.

These figures, while tempering expectations that the US central bank will end its cycle of monetary tightening, provide some relief to markets in a week when fears about the health of US regional banks have resurfaced.

VALUES

IAG, owner of British Airways, gained 2.3%, as the airline forecast a profit above expectations this year thanks to a strong rebound in demand.

Air France-KLM, on the other hand, reported an operating loss slightly above expectations, but gave up 2.6%.

Adidas jumped 8.9%, following the publication of better-than-expected quarterly results.

Telecom Italia gained 8%, as sources told us that the Italian Treasury is ready to support a proposed purchase of the operator's fixed-line network by KKR and the Italian Caisse des Dépôts (CDP).

ON WALL STREET

At closing time in Europe, the Dow Jones gained 1.19%, the Standard & Poor's 500 1.43% and the Nasdaq Composite 1.73%, with giant Apple up 4.9% after reporting better-than-expected quarterly results on Thursday.

US regional bank PacWest, which fell by more than 50% on Thursday, gained 78%.

INDICATORS OF THE DAY

Industrial production in France declined in March, according to data published Friday by Insee, with a significant drop in coking and refining due to strike action at refineries.

In Germany, industrial orders recorded a sharper-than-expected contraction in March, the biggest one-month contraction since 2020, at the height of the COVID-19 pandemic, according to the Federal Statistics Office.

Retail sales in the 20 countries sharing the euro also fell by more than expected on a month-on-month basis in March, according to Eurostat data, as inflation and rising interest rates took a heavy toll on disposable incomes and limited purchasing power.

CURRENCIES

The dollar index, which measures its performance against a basket of reference currencies, fell by 0.1 after the official US employment report.

The euro gained 0.1% to $1.1024.

RATES

Bond yields rose after stronger-than-expected US job creation data tempered expectations of a rate cut by the Federal Reserve.

In Europe, the ten-year German Bund yield rose by 9 basis points to 2.2%, while its two-year equivalent gained over 8 basis points to 2.6%.

In the United States, the yield on ten-year US government bonds advanced by more than 10 basis points to 3.4% after falling below 3.3% on Thursday, for the first time in a month, on fears about banks.

Its two-year equivalent advanced by 20 basis points to 3.9%.

OIL

Oil prices are rising, but are set to suffer a third consecutive week of losses in response to concerns about a weakening US economy and Chinese demand.

Brent crude, down around 5% on the week, gained 3.35% to $74.93 a barrel, while US light crude (West Texas Intermediate, WTI) advanced 3.56% to $70.99 but posted a weekly decline of 7%.

(Written by Diana Mandiá, edited by Matthieu Protard)