UPDATE 2-ASML, L'Oreal guide European shares to three-week highs

* ING jumps on Q4 beat
* ASML among top gainers in tech sector
* STOXX 600 up 1% this week
* UK economy suffers record 9.9% slump in 2020

(Updates to close)
By Shreyashi Sanyal and Susan Mathew
Feb 12 (Reuters) - European shares reversed earlier losses
to close higher on Friday, led by ASML and L'Oreal, although a
dip in Volkswagen weighed on Germany's main index.
The pan-European STOXX 600 index .STOXX closed up 0.6% at
a three-week high for a second straight week of gains.
ASML Holding NV ASML.AS rose 3% after the Dutch equipment
maker said the chip shortages slowing car production were a
symptom of a broader increase in demand. The world's biggest cosmetics group L'Oreal OREP.PA hit a
three-month high after forecasting a strong rebound in makeup
sales. Germany's DAX .GDAXI underperformed, ending flat as
carmaker Volkswagen VOWG.DE slipped 0.7% after the company
said deliveries slid in January. Gains in Spain's IBEX .IBEX were capped after data showed
consumer prices rising slightly below expectations in January.
ING Groep NV INGA.AS jumped 6.7% after the largest Dutch
bank reported better-than-expected quarterly pre-tax earnings of
1.05 billion euros ($1.27 billion). Analysts expect growth in corporate earnings this year,
driven by stimulus-induced liquidity, but are wary of next year
as the measures may start to fade.
Market participants were hopeful that a proposed $1.9
trillion U.S. stimulus bill would be passed soon by lawmakers,
with a stalling recovery in the U.S. labour market strengthening
the case for it. MKTS/GLOB
"We're still not out of the woods...and the market is
potentially overdue a reckoning," said Connor Campbell, analyst
at spreadbetter Spreadex.
"Once the (U.S. stimulus) package has been implemented, it
will be interesting to see how markets will behave, as they will
no longer have this big thing to cling on to."
The STOXX 600 is about 5% away from its peak of February
2020 after rallying 50% since a crash in March, aided by
historic monetary and fiscal stimulus and the rollout of
COVID-19 vaccines.
"We believe a hospitalization rate low enough to enable
sustainable reopening and economic recovery can be achieved by
April in the U.S. and by June in Europe," said Mark Haefele,
chief investment officer at UBS Global Wealth Management.
Britain's coronavirus-ravaged economy shrank 9.9% in 2020,
the biggest annual fall in output since modern records began,
but it avoided heading back towards recession at the end of last
year, data showed. London's FTSE 100 index .FTSE erased early losses to rise
0.9% with healthcare stocks .FTNMX4570 in the lead.