UPDATE 2-Banks boost European stocks as recovery hopes grow

(For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window)

* European banks hit fresh 1-year high

* Rising yields lifts cyclical stocks

* Pearson jumps on targeting consumers directly with new strategy (Adds comments, updates prices throughout)

By Sruthi Shankar and Shreyashi Sanyal

March 8 (Reuters) - Shares of banks and automakers lifted European shares on Monday as investors continued to move into economy-linked sectors on hopes of a solid economic rebound from the coronavirus downturn.

The pan-European STOXX 600 index .STOXX gained 2.22%, its best one-day performance since early November. The banking sector .SX7P gained 3.73% to hit a fresh one-year high.

Spain's Banco de Sabadell SABE.MC jumped 7.1%, while HSBC HSBA.L , Banco Santander SAN.MC and ING Groep INGA.AS rose more than 2%.

Automakers .SXAP and insurers .SXIP also rose about 3%, while sectors considered bond-proxies like utilities .SX6P and personal & household goods .SXQP were among the laggards.

"The reflationary trade is being more supportive of European stocks in general because they're not as weighted towards growth and tech that the U.S. is," said Neil Wilson, chief market analyst at Markets.com.

"You've got some progress on trade with between Europe and the U.S. and that's good for some of the companies like Rolls-Royce."

Aero engines-maker Rolls-Royce RR.L rose 7.3% to top gains on UK's blue-chip FTSE 100 .FTSE . The European Union and the United States agreed on Friday to suspend tariffs imposed on billions of dollars of imports in a 16-year-old dispute over aircraft subsidies. England's schools reopened to all pupils on Monday, marking the first step back towards normality as COVID-19 infection rates fall. also came in positive, with the Ifo economic institute saying the mood in the German manufacturing sector improved for the third month in a row in February. the radar, a European Central Bank meeting later this week will show if policymakers have decided to step up the pace of emergency bond purchases to calm skittish financial markets.

"What they won't welcome is the rise in borrowing costs that has come about as a result of the recent surge higher in global bond yields," said Michael Hewson, chief market analyst at CMC Markets.

Pearson's PSON.L jumped 6.4% as its new boss set out his plan for the British education group to grow beyond schools and colleges with a strategy to build a lifelong direct connection to consumers by helping workers to learn new skills and retrain. meal kit delivery company HelloFresh HFGG.DE sank 5.0% after BNP Paribas (PA: BNPP ) downgraded the stock to "underperform".

London Stock Exchange LSEG.L fell 6.7%, extending its slide from Friday when it forecast higher costs for integrating data and analytics company Refinitiv, which it acquired in January for $27 billion.