European shares gained yesterday in a choppy session, tracking a higher Wall Street, with both cyclical commodity stocks and defensive drug-makers rising sharply.
The FTSEurofirst 300 index of top European shares closed up 1.8 per cent at 914.63 points, its first daily gain in three sessions, having fallen to as low as 890.81 points in volatile trade.
European stocks recovered from earlier lows as investors shrugged aside weak US jobs data which showed US employers cut payrolls by 240,000 in October, much more severely than expected, while September registered the biggest monthly loss in jobs in nearly seven years.
"While the jobless figures out on Friday have been bad, a lot of it has been priced in the market. Traders are keen to get back in again, words such as cheap valuations are beginning to fly around again," said Tom Hougaard, strategist at City Index.
"There is a growing sentiment that we have seen the lows for some time and now people want to get in," Mr Hougaard said.
Darren Winder, strategist at Cazenove, also said the jobs data had only confirmed what was already feared. "Weak numbers are also likely to put pressure on the Fed to continue easing," he said.
Energy stocks contributed the biggest gains on the European index as crude rose 0.9 per cent.
BG Group, BP, Royal Dutch Shell and Total were up between 2.8 and 4.4 per cent.
Mr Winder said investors were beginning to put money into the oil sector as the stocks offered more attractive dividend yields than other sectors.
Metals gained as copper rose. BHP Billiton, Rio Tinto and Vedanta Resources were 4.5 to 5.3 per cent higher.
Pharmaceuticals also continued to rise following gains on Thursday. Novartis, Roche and GlaxoSmithKline were up between 2.9 and 3.4 per cent.
Insurers advanced after Munich Re, up 6.6 per cent, said it was confident about its medium-term goal, although it slashed its 2008 profit forecast for a second time.
AXA, Allianz and Swiss Reinsurance were up 1.9 to 6 per cent.
Banks stocks were mixed. UBS and Bank of Ireland were down between 3.9 and 16 per cent, but Barclays, Société Générale and Lloyds TSB were up 1.45 to 6.9 per cent.
Across Europe, the FTSE 100 index was up 2.2 per cent, Germany's DAX was up 2.6 per cent and France's CAC 40 was up 2.4 per cent.
Real estate was one of few sectors in the red after Morgan Stanley said it expected a further 42 per cent fall in the share prices of major UK property companies.
It said there would be virtually no new debt advanced on UK commercial property over the next 12 to 18 months because banks were short of capital and felt overexposed to the asset class.
Land Securities and British Land were down 1.5 and 2.5 per cent respectively.
German electronic conglomerate Siemens lost 1.2 per cent.
The group is expected to report an 82.3 per cent decrease in fourth-quarter pre-tax profit to €273 million, according to an average of 18 estimates in a Reuters poll of analysts.
Lafarge, the world's biggest cement maker, fell 2.9 per cent after it abandoned its 2010 goals, citing uncertainty triggered by the global economic turmoil.