European shares rose yesterday as surging oil prices boosted the shares of energy firms, partly offsetting the impact of US jobs data that dashed expectations for a Federal Reserve rate cut in the next year.
Oil stocks were the biggest positive weight on the broader market as crude futures shot above $75 a barrel to their highest level in almost a year and oil shares also benefited from broker upgrades to the sector.
The US June non-farm payrolls report showed a rise of 132,000 and contained a number of upward revisions for prior monthly data, which painted a more robust picture of the US jobs market and limited gains in the stock market.
The FTSEurofirst 300 index of top European shares officially closed up 0.63 per cent at 1,619.83 points.
"Looking at the numbers in isolation, they look pretty good and obviously it gives lie to the view that the US economy is about to collapse and if you look at what happened to stocks generally speaking, they're in positive territory around the world," said Commerzbank economist Peter Dixon.
"Overall, the (jobs) numbers were a bit of a wash because the market had taken the view that the (US) economy is holding up but it kind of delays the inevitable in terms of when the Fed is likely to cut interest rates," he said.
US stocks pared losses and turned positive, however, leaving the FTSEurofirst with its second weekly consecutive rise.
Shares in BP, Total and Royal Dutch Shell were among the top weighted gainers on the FTSEurofirst, as BP rose by 1.1 per cent, while Shell stock rose 2.7 per cent. The oil price has risen by about six per cent this week, making this its strongest weekly advance since the week of April 4.
Disruptions in Nigeria and output cuts by Opec have ignited concern that global supply is falling as demand is picking up from refiners in top consumer the United States. The energy sector also rallied after Lehman Brothers raised its earnings forecasts for European oil companies and Deutsche Bank upgraded BP and Shell to "buy".
Major European stock markets rose, with London's FTSE 100 index up 0.8 per cent, Frankfurt's DAX up 0.8 per cent and the Paris CAC 40 0.7 per cent higher.
In merger news, Rio Tinto, the world's second-biggest miner, is considering gate-crashing Alcoa Inc.'s $28 billion hostile bid for North American rival Alcan Inc., sources familiar with the matter said.
Rio shares were last up 0.1 per cent, underperforming the sector.
Mining stocks generally rose after Credit Suisse upgraded its price forecasts for precious and base metals and raised its price targets for some metal and mining companies. BHP Billiton rose 3.7 per cent, while copper miner Antofagasta gained 2.6 per cent and Kazakhmys rose 1.9 per cent.
"The resounding message from the field is that "supply is not keeping pace, and probably won't in some cases, for several years," Credit Suisse said in the note, referring to the outlook for commodity markets.