* FTSEurofirst 300 up 2.4 pct after strong U.S. data
* Greek banks up 7 pct as election fears ease
* Car makers rally after positive sales figures
* European equity funds suffer record weekly outflows -Lipper
By Francesco Canepa
LONDON, Oct 17 (Reuters) - European stocks were on track for their steepest daily rise in over a year on Friday as stronger U.S. data helped fuel a rebound from recent, sharp losses and worries about Greece's political stability eased.
At 1429 GMT, the pan-European FTSEurofirst 300 index was up 2.4 percent at 1,276.21 points, setting it on track for its biggest daily bounce since July 4, 2013. Volume was 30 percent higher than the index's full day average for the past three months.
The FTSEurofirst extended gains in the afternoon after a widely followed survey showed U.S. consumer sentiment rose in October to the highest in more than seven years, boosted by views on personal finances and the national economy.
The index had fallen nearly 12 percent over the previous month, as a raft of weak euro zone macro economic data raised the spectre of a new recession in the region as the Federal Reserve winds down its asset purchase programme and the European Central Bank has yet to start its own.
"Valuations have improved after the sell-off," said Fadi Zaher, who helps to manage assets worth 7.5 billion euros ($9.5 billion) at Kleinwort Benson.
"However, on a relative basis, European equities are not attractive for the risk that they represent (and) have to underperform the U.S. by 10 percent to become attractive from current levels."
Greek banks rallied 7 percent, having shed some 16 percent over the previous three days, after Prime Minister Antonis Samaras said his government was in talks with lenders over the country's post-bailout period and dismissed the prospect of new elections.
Car makers surged 3.4 percent, with France's PSA Peugeot Citroen up nearly 7 percent, after data showed car sales in Europe rose 6.1 percent in September, the 13th straight month of growth in sales.
On the downside, a warning from Rolls-Royce that it would not return to growth next year sent shares in the British engineering group down 13.9 percent.
Shares in technology firm Gemalto tumbled 9.5 percent after Apple unveiled a new SIM card that will be installed in its iPads, sparking worries over the future of Gemalto's own smart chips for mobile phones, traders said.
The month-long sell-off in European stocks prompted U.S.-based investors to slash their exposure to Europe, according to data from Thomson Reuters Lipper.
A Lipper poll of 109 U.S.-domiciled funds invested in European stocks, which include exchange-traded funds' (ETFs) holdings, shows net outflows of $1.3 billion in the seven days to Oct. 15, the biggest weekly redemptions since Lipper started to monitor the data in 1992.
"We think sentiment and fund flow have exaggerated the recent sell-off, and although the fundamentals may have worsened a bit, the equity market has overshot," Barclays Capital analysts said.
"Economic growth expectations have come down a bit, and incoming data have disappointed, but the stock market appears to us to have overreacted," they said.
In this context, many fund managers were holding on to their equities or even increasing their equity positions, seeing value in shares after the recent slide in prices.
"I think markets will bounce back," Cazenove Capital Management's chief investment officer, Richard Jeffrey, said. "I don't think anything really fundamentally has changed." (1 US dollar = 0.7833 euro) (Editing by Robin Pomeroy)