European stocks rally as banking fears fade, Spanish inflation cools

March 30 (Reuters) - European stocks rose to three-week highs on Thursday, lifted by signs of cooling inflation, upbeat results from retail giant H&M and fading concerns about the global banking sector that sparked a rally on Wall Street overnight.

The pan-European STOXX 600 index (.STOXX) rose 0.8%, hitting it strongest level since March 10, after major U.S. stock indexes rallied on Wednesday.

The benchmark S&P 500 (.SPX) closed above its 50-day moving average for the first time since March 6, before the onset of the bank crisis.

"It's a combination of easing banking fears and expectation that we are very close to peak rates which is lifting indices," said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

"With contagion appearing to be contained for now, it's providing relief for real estate stocks amid hopes that interest rate hikes are nearly at an end."

Europe's real estate sector (.SX86P) jumped 3.2%, as immediate concerns about prospects for the highly leveraged sector eased after a heavy drop in March dragged it close to 10-year lows hit last year.

Banks (.SX7P) rose 1.8% to hit a one-week high, as investors took heart from the sale of failed Silicon Valley Bank's assets and takeover of embattled Swiss lender Credit Suisse (CSGN.S).

Further helping the mood, data showed Spain's consumer price inflation slowed to 3.3% in March, its weakest annual rate since August 2021 and down from 6.0% in February.

"Spain's CPI is a welcome bit of news really, and seems to have provided markets with another reason for a rally," said Chris Beauchamp, chief market analyst at IG.

A drop in Germany's North Rhine-Westphalia inflation to 6.9% in March from 8.5% a month ago also helped European equities. The federal statistics office will publish a flash estimate for nationwide inflation at 1200 GMT.

H&M (HMb.ST) climbed 12.7% after the world's second-biggest fashion retailer reported a surprise operating profit for the December-February period but warned that overall sales for the spring season had been delayed by cold weather.

The wider retail index (.SXRP) rallied 3.0%.

Danish wind turbine maker Vestas (VWS.CO) climbed 5.9% after it won an order in Brazil.

Dutch health technology firm Phillips (PHG.AS) rose 7.5% after its CEO Roy Jakobs told Dutch financial daily FD that the company expected to reach settlements this year relating to its global recall of respiratory devices.