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* Pan-European STOXX 600 index up 1.6 pct
* Italian lenders biggest gainers in strong bank sector
* Autos top sectoral gainer after China data
* Telecoms firm TDC soars after takeover approach
By Danilo Masoni and Atul Prakash
MILAN/LONDON, July 8 (Reuters) - European shares rose on Friday, ending a week of losses on a positive note with Milan outperforming thanks to a rally in its battered baking stocks.
Equities got a boost late in the session from a stronger-than-expected jobs report in the United States.
The pan-European STOXX Europe 600 rose 1.6 percent but still ended the week with a loss of 1.5 percent due to persistent worries over the economic and political fall-out of Britain's vote on June 23 to leave the European Union.
"The concerns of the Brexit are reflected quite well in share prices so the question is how much pain (there) will be before a relief. It's probably still a little bit away," Gerhard Schwarz, head of equity strategy at Baader Bank in Munich, said.
"It will also depend on a rebound in banks as the systemic risk due to Brexit is certainly a concern and credit risks coming from Italy are weighing on the sector," he said.
Milan's blue chip index outperformed the region to gain 4.1 percent with banks Intesa Sanpaolo Banco Popolare and UniCredit posting gains of between 8.7 and 18.4 percent.
Capital weakness and a mountain of bad loans have put Italian banks at the centre of investors' immediate concerns following the shock UK vote. But traders on Friday said there was some optimism that a solution to help Italian banks cut their soured loans could be reached.
"We have to monitor the situation very closely but if and when we'll get a solution, it will be a very interesting opportunity for financials but also European equities in general," Saxo Bank head of equity strategy Peter Garny said.
The European banking index, the worst sectoral performer since Brexit and so far this year, rose 3.8 percent.
The auto index rose 3.9 percent, making it the biggest sectoral gainer after data showed passenger vehicle sales in China rose 19.4 percent in June.
Germany's auto-heavy DAX index rose 2.2 percent with BMW, Daimler and Volkswagen gaining 3.6 to 4.3 percent.
Shares in Danish telecoms group TDC jumped more than 9 percent after it said it had rejected a potential takeover approach believed to be from private equity firm Apollo Global Management.
Reporting by Danilo Masoni; Editing by Mark Heinrich