UPDATE 2-German stimulus hopes pull European shares from 6-month lows

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* Banks lead rally after reports of possible German stimulus
* FTSE lags slightly as technical problem delays open
* Chip stocks gain after solid results from U.S.
counterparts
* China hints that it plans to boost economic growth

(Updates to close)
By Susan Mathew and Shreyashi Sanyal
Aug 16 (Reuters) - European shares rebounded from six-months
lows on Friday, ending a tumultuous week on a positive note as
hopes of fiscal stimulus from Germany lifted sentiment and
sparked a rally in the battered banks sector, helping them post
their best day in 4-1/2 months.
Germany's right-left coalition government would be prepared
to ditch its balanced budget rule and take on new debt to
counter a possible recession, Der Spiegel magazine reported on
Friday.
Germany's DAX .GDAXI , pressured of late by fears of a
slide into recession as trade tensions between the United States
and China flare up, rose 1.3%, and German bonds came off lows
after the report.
"The market is appearing to have some confidence that
Germany will actually conduct some amount of fiscal stimulus
while being on the brink of recession," said Yousef Abbasi,
global market strategist at INTL FCStone Financial Inc in New
York.
"This would be awfully encouraging. You could potentially
see money rotate out of the U.S. and into Europe considering the
divergence of performance and valuation we've had in the two
developed markets."
Banks .SX7P , which have lost nearly 8% this month
pressured by tumbling bond yields, were the top gainers on
Friday up 2.4% to log their best session since early April.
With all other sectors also in the black, the pan-European
stocks benchmark .STOXX rose 1.2%, adding to morning gains
when stimulus hopes from Beijing had supported risk
appetite. The index, however, extended losses to a third straight
week, down 0.5%, as worrying headlines of a global recession
kept investors on edge, largely because of the trade drama.
Central bank stimulus hopes also added to the optimism after
European Central Bank policymaker Olli Rehn's comments on
Thursday fueled expectations for aggressive ECB easing
soon. GVD/EUR
The tech sector .SX8P rose 1.7% propped up by chipmaker
stocks after solid earnings from Nvidia NVDA.O and chip gear
maker Applied Materials AMAT.O .
AMS AMS.S , Infineon Tech IFXGn.DE and STMicroelectronics
STM.MI rose between 1.2% and 2.1%.
While all major indexes in Europe rose more than 1%,
Britain's blue-chip FTSE 100 .FTSE finished up 0.7%, lagging
slightly after an outage at the London Stock Exchange due to a
technical glitch cut trading short by almost two hours.
In corporate news, specialty chemicals company IMCD
IMCD.AS slumped 15% to the bottom of the STOXX 600, after it
reported weaker-than-expected organic sales in the second
quarter.