European stocks jump over one per cent on US jobs data

European stocks closed over one per cent higher yesterday after weaker than expected US employment data boosted hopes that the Federal Reserve will halt its run of interest rate rises at its August 8 meeting.

Further upbeat earnings from companies including miner Anglo American and German insurer Allianz also buoyed sentiment.

The pan-European FTSEurofirst 300 index of leading shares closed 1.2 per cent firmer at 1,345.5 points having been up 0.5 per cent ahead of the US jobs data.

The benchmark, which ended almost flat on the week, had slipped 0.9 per cent on Thursday as the Bank of England surprised with its first interest rate rise in two years and the European Central Bank sounded hawkish after raising rates, as expected.

The US July payrolls data came in at a rise of 113,000 jobs with the June increase revised up to 124,000. The median forecast of a Reuters survey found economists looking for 142,000 new jobs.

"We were still of the opinion that the US won't raise interest rates next week, and I suspect that because the numbers were a little bit weaker than expected there is a reason not to (increase rates)," said Iain Armstrong, equity analyst at Brewin Dolphin Securities.

"But if they are worried about inflation that may be the sticking point."

Around Europe, France's CAC 40 added 1.2 per cent, Germany's DAX gained 1.5 per cent and the UK's FTSE 100 added 0.9 per cent.

The Dow Jones industrial average and Nasdaq Composite surged on the payrolls data when New York opened but later cut gains.

Anglo American shot up five per cent after the miner's first-half operating profit jumped and it announced a new $4 billion share buyback and $1 billion special dividend.

Allianz added 3.7 per cent after it raised its profit target for the year and French power utility EDF surged six per cent as a rise in first-half sales beat expectations.

"On balance, the earning season's been positive and supportive of the markets," said Michael Joynson, product director for European equities at Invesco Perpetual.

Online gaming stock PartyGaming soared nine per cent higher as investors reappraised the battered sector on consolidation hopes and speculation a US anti-gaming bill will struggle to be passed.

On the downside, British Airways slid over three per cent after warning of a tougher second half and higher than expected labour costs as it reported a 20 per cent rise in first-quarter profits, helped by fuller planes.