By Ankika Biswas and Bansari Mayur Kamdar
(Reuters) -European shares extended their gains from November on Friday, propelled by sharp rises in miners and as euro zone bond yields continued to fall on growing expectations of interest rate cuts.
The pan-European STOXX 600 rose 1.0% to its highest level since August, after a monthly gain of 6.4% in November.
It closed higher for a third straight week, supported by weekly gains in rate-sensitive real estate stocks.
Euro zone bond yields extended losses after soft U.S. manufacturing data and comments from U.S. Federal Reserve Chair Jerome Powell supported hopes that rate cuts could come as early as the first quarter of next year.
Meanwhile, Goldman Sachs expects the European Central Bank to deliver its first rate cut in the second quarter of 2024, compared to earlier forecast of the third quarter of next year.
"(At) some point in the future investors are seeing some relief to euro zone via lower rates, and that pushes back against some of the stagflation fears that have been growing," said Giles Coghlan, chief market analyst at brokerage GCFX Ltd.
"I don't think we're out of the woods and the euro zone is very data dependent," Coghlan added.
Joining ECB officials snubbing rate cut bets, Bundesbank President Joachim Nagel noted risks are skewed towards more negative outcomes, so a further rate hike cannot be dismissed and cuts should not even be discussed.
Miners were the top sectoral gainers on Friday, rising 4.2% tracking higher metal prices on a softer dollar and supportive data from top consumer China.
Anglo American (JO:AGLJ) topped the STOXX 600 with a 7.9% gain, while Antofagasta (LON:ANTO) jumped 6.2% after UBS upgraded both to "buy" from "neutral".
The ECB said it has approved an amendment to state aid for the restructuring of Poland's Getin Noble Bank. PKO BP (NYSE:BP) and Pekao gained 4.3% and 5.2%, respectively.
Meanwhile, fresh data showed the broad-based downturn in euro zone manufacturing activity eased slightly last month, but the sector remained deeply rooted in contractionary territory.
Other data sets showed Italy's economy grew 0.1% in the third quarter, thanks to exports and firm consumer spending, revising up preliminary data. The benchmark index was up 0.6%, holding its 2008 highs.
Among individual stocks, Signify climbed 4.9% as the world's biggest lights maker announced a new organisational structure to reduce costs.
Bechtle shed 4.5% after announcing a convertible bond offering.
Swedish streaming firm Viaplay's shares fell 74.4% to a record low on plans to raise new equity and restructure its debt.