UPDATE 2-Evergrande relief, earnings prop up European stocks

·2 min read

* Global mood improves after Evergrande payment

* Inflation expectations soar in Europe

* L'Oreal helps French blue chips outperform (Updates to close)

By Anisha Sircar and Susan Mathew

Oct 22 (Reuters) - European stocks rose on Friday on a surge in technology stocks, strong earnings from France's L'Oreal and a broad boost to sentiment provided by a surprise interest payment from debt-ridden China Evergrande Group.

The STOXX 600 added 0.5% to close at over six-week highs and logged its third consecutive week of gains, up 0.5%.

News that the Chinese property developer had made a bond payment to avert a default lifted the mood globally. Worries about contagion from a potential default have rattled markets recently.

France's blue-chip CAC 40 rose 0.7% and outperformed its European peers, riding on a 5.1% surge in L'Oreal shares following the cosmetics company's strong results.

Shares in Dutch semiconductor equipment maker ASML and German software firm SAP rose 3.2% and 1.2% respectively, after stumbling earlier this week following their results. The tech sector rose 1.5%.

Investors appeared to look past a survey that showed growth in euro zone business activity slowed in October as firms face soaring costs due to supply-chain constraints, while the bloc's dominant service industry struggled amid ongoing COVID-19 concerns.

Automaker Renault and Continental both flagged chip-shortage hitting output and margins.

"We've lots of earnings beats on lowered expectations, and then you're getting comments from CEOs suggesting supply chains are damaged - but certain firms have said that they're on top of it," said Keith Temperton, sales trader at Forte Securities. "That's hopeful for the markets."

A bunch of upbeat earnings lifted Wall Street's S&P 500 to a record high, while its European counterpart is less than 1% shy of its August peak.

Europe Inc is expected to see a 47.6% rise in third-quarter profit to 96.1 billion euros ($112 billion), latest data from Refinitiv I/B/E/S showed, a slight improvement from last week's 46.7% growth forecast.

Euro zone inflation expectations hit their highest levels in years, putting additional pressure on the European Central Bank over its insistence on maintaining crisis-era stimulus. The central bank is set to meet next week.

"That inflation is transitory does not necessarily mean that it is short-lived. An adjustment of supply to the changes in patterns of demand caused by the pandemic may be slow, and keep upward pressure on prices for longer," strategists at Citi wrote in a note.

Swedish mining firm Boliden dipped 6.8% as its third-quarter operating profit fell below market forecasts.

Remy Cointreau rose 1.8% after it said it was growing increasingly confident about its full year outlook after second-quarter sales beat expectations.

(Reporting by Anisha Sircar and Sruthi Shankar in Bengaluru; Editing by Subhranshu Sahu and Anil D'Silva, William Maclean)

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