* FTSEurofirst 300 up 0.9 percent; hits highest close in 5 mths
* Banks lead gains; sector up 118 percent since early March
* Defensives stocks catching up in cyclical-led rally
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By Blaise Robinson
PARIS, June 11 (Reuters) - European equities ended at their highest close in five months on Thursday, propelled by buoyant banking stocks, as U.S. macro data showing the recession was abating helped shares extend their sharp three-month rally.
Data showed sales at U.S. retailers rose in May for the first time in three months, and the number of workers filing new applications for jobless benefits fell for a fourth straight week last week.
The FTSEurofirst 300 index of top European shares ended 0.9 percent higher at 887.78 points, the index's highest close since Jan 6.
Thursday's rally was led by banking shares, such as HSBC, UBS, Barclays and BNP Paribas, up 2.2-5.6 percent.
But sectors seen as defensive such as utilities, pharma and telecoms -- shunned by investors during most of the spring rally -- were also on the rise, with Vodafone up 2.5 percent, Roche up 1.9 percent and E.ON up 1.3 percent.
"Cyclical stocks are now priced at valuation levels that we usually see at mid-cycle. That's premature because the economic activity is still in bad shape," said Chicuong Dang, equity analyst at KBL Richelieu, in Paris.
"Meanwhile, valuation multiples in sectors such as telecoms and utilities are still very attractive."
Around Europe, UK's FTSE 100 index gained 0.6 percent, Germany's DAX index rose 1.1 percent, and France's CAC 40 added 0.6 percent.
Auto stocks gained ground, with Daimler up 2.7 percent and BMW up 1.2 percent. French car parts maker Valeo, upgraded to "buy" by Merrill Lynch, surged 8.5 percent.
Among the few stocks on the downside, Carrefour lost 3.7 percent, dragged lower by market talk that the retailer could lower its profit outlook, according to traders. Carrefour declined to comment.
LOSING STEAM?
The FTSEurofirst 300 has risen 38 percent since reaching a record low in early March, as better-than-feared macro data fuelled recovery hopes.
The sharp rebound has been led by banks, up 118 percent over the past 3 months, and basic resources, up 85 percent, while sectors seen as defensive have lagged behind, with telecoms up only 6 percent and healthcare, up 13 percent.
But a number of analysts and fund managers warn we could see a period of consolidation after the recent sharp gains because, despite a few "green shoots", there is still a lack of visibility on the outlook for the world economy.
"Equities, credits and commodities, government bonds have had a torrid time," said Paul Niven, F&C's head of asset allocation.
"From here, with valuation broadly fair and limited scope for upside surprises in economic and corporate newsflow, we see the risks on equities and credits as much more finely balanced," Niven wrote in a note.
So far this year, UK's FTSE 100 index is up 0.6 percent, Germany's DAX index up 6.2 percent, and France's CAC 40 up 3.6 percent.
"The stabilisation of the macro situation we see through data is now priced in. To move higher from here, we need real signs of improvement, but they haven't come yet," said KBL Richelieu's Dang said. (Reporting by Blaise Robinson; Editing by Hans Peters)