UPDATE 2-European shares end higher on U.S.-China talks, earnings optimism

* U.S.-China trade talks calm investor nerves
* Basic resources sector best weekly performer
* Bank sector among worst weekly performers
* Decision on Italy's credit rating awaited

(Updates to close)
By Sruthi Shankar and Ambar Warrick
May 8 (Reuters) - European shares closed higher on Friday,
clocking weekly gains as signs of improving U.S.-China relations
provided a fresh dose of optimism for investors counting on the
easing of lockdowns to spark a recovery in global growth.
The pan-European STOXX 600 .STOXX closed up 0.9%, with
dialogue between U.S. and Chinese officials over their phase-1
trade deal soothing investor about a renewed trade spat.
Automobile stocks .SXAP , which rely heavily on China as a
market and a production hub, led gains for the day, rising
nearly 3%.
Strong earnings also helped, with ING Groep NV INGA.AS ,
the largest Dutch bank, adding 3.6% as it posted first-quarter
pretax earnings that beat market expectations. Siemens SIEGn.DE rose 4.8% after the German industrial
company announced cost-cutting plans to deal with the impact of
the pandemic following an 18% drop in industrial profit in the
second quarter. Bourses in Frankfurt .GDAXI and Paris .FCHI rose 1.4%
and 1.1%, respectively. London markets were closed for a public
holiday.
The STOXX 600 added about 1.1% for the week, as a series of
better-than-expected earnings helped distract investors from a
continued stream of weak economic readings due to the
coronavirus.
Basic resources stocks .SXPP were the best weekly
performers among the European subindexes, as optimism over the
gradual reopening of economies and robust Chinese trade data
pushed up commodity prices.
On the other hand, bank stocks .SX7P lagged most of their
peers for the week, as growing discord between Germany and the
European Central Bank cast doubts over certain ECB asset
purchasing programmes.
Italy for instance, depends heavily on one of the programmes
to keep borrowing costs down , and with the country set for its
worst post-war recession, its lenders face a surge in
bankruptcies.
The country's bank-heavy index .FTMIB lost 1.5% for the
week, as markets await decisions from rating agencies DBRS and
Moody's on Italy's sovereign debt.
"As we do not expect a downgrade by Moody's, the likelihood
is that we will see a solid start on Monday," UniCredit analysts
wrote in a note.
"Nevertheless, investor concerns about a possible cut to
below investment grade by one rating agency are likely to
persist in the coming quarter."
German military equipment and auto parts group Rheinmetall
RHMG.DE ended largely flat after it forecast significantly
lower sales and profits this year due to the pandemic.
Norwegian insurer Storebrand ASA STB.OL shed 2.9% after
Kepler Cheuvreux downgraded the stock to "reduce".