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European shares log best day in two months on tech advance; notch weekly losses

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May 26 (Reuters) - European shares jumped on Friday on strong gains in technology stocks, although the main benchmark logged a steep weekly decline on growing concerns over a slowing global economy and uncertainty around debt ceiling talks in the United States.

The pan-European STOXX 600 index (.STOXX) closed 1.2% higher, logging its strongest one-day gain in nearly two months, bouncing back from an eight-week low hit on Thursday.

Concerns about whether the two sides could reach a deal and avert a debt default have weighed on markets in recent weeks. The benchmark index clocked its worst weekly drop - of 1.5% - in more than two months.

Latest developments showed the White House and congressional Republicans on Friday aim to put the final touches on a deal to raise the debt ceiling for two years, while capping spending on everything but the military and veterans.

"Given the sell-off in stocks earlier this week on fears of no agreement being found, the last thing you want is not to be positioned in equities to capture any bullish move that would accompany an agreement being reached over the weekend," said Stuart Cole, chief macro economist at Equiti Capital.

"Some kind of deal could be reached before funds run out, even if it is a temporary solution that buys both sides more time to come up with something more comprehensive."

Technology (.SX8P), the top sector performer, rallied for a second day on U.S. chipmaker Nvidia's strong forecast and Marvell Technology's (MRVL.O) upbeat AI revenue guidance, with ASML Holding (ASML.AS) jumping 4.5% to a more than one-year high.

Luxury majors including LVMH (LVMH.PA), Hermes (HRMS.PA) and Kering (PRTP.PA) continued their rebound, up between 1.4% and 2.4%, after a bruising selloff earlier this week.

European stocks rallied to multi-year highs earlier this month, with the German DAX (.GDAXI) notching a record high as investors took heart from upbeat earnings reports despite signs of a slowing economic growth and sticky inflation.

On the monetary policy front, another two rate hikes from the European Central Bank are still on the cards but moves further out remain open to debate as inflation is still stubborn, Irish central bank chief Gabriel Makhlouf said, while chief economist Philip Lane noted that the central bank should not try to predict where rate hikes need to end.

The ECB's next policy meeting is due next month.

Among major stocks, Swedish gaming company Embracer (EMBRACb.ST) jumped 13.1% to top the STOXX 600. Sweden's Financial Supervisory Authority received transaction notifications on board members buying in total more than 6 million shares.

Faurecia (EPED.PA) added 7.5% after Jefferies upgraded the French car parts maker to "buy".

Casino (CASP.PA) slumped 6.4% following its trading resumption as analysts point to continued uncertainties around its unsecured debt, even as the debt-saddled retailer started court-backed negotiations with creditors.

Meanwhile, data showed morale amongst Italian businesses and consumers fell in May, data showed on Friday, signalling an uncertain near-term outlook for the euro zone's third largest economy.

Reporting by Sruthi Shankar and Ankika Biswas in Bengaluru; Editing by Sherry Jacob-Phillips and Arun Koyyur
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