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PARIS, Oct 11 (Reuters) - European stocks rallied on Thursday as a drop in U.S. jobless claims fuelled recovery hopes for the world's biggest economy while Spain's credit downgrade boosted expectations that Madrid would soon request a bailout.
The FTSEurofirst 300 index of top European shares unofficially closed 0.9 percent higher at 1,099.37 points, snapping a three-day losing streak during which the index had lost 1.9 percent.
"We're buying the dips, adding beta in portfolios. The overall newsflow isn't too bad, and we've got profit warnings already so expectations for the upcoming earnings season are not very high," Talence Gestion fund manager Alexandre Le Drogoff said.
"Even as economic growth remains sluggish, we have the feeling that the safety nets put in place by the ECB will work, and it's a big relief. It basically brings back visibility."
Data showed initial jobless claims fell to the lowest level in more than four and a half years, signalling improvement in the battered U.S. labour market.
Luxury stocks paced the gains on Thursday as Burberry's reassuring comments on sales trends - a month after its shocking profit warning - helped the sector reverse a portion of its month-long slide, with traders also mentioning short covering.
Burberry surged 13.6 percent, Louis Vuitton owner LVMH added 4.1 percent and Swiss watch maker Richemont gained 4.5 percent.