European shares rallied yesterday on optimism about a solution to the eurozone debt crisis at next week’s EU summit and a drop in the US jobless rate after a week of sharp gains.

London’s FTSE 100 index of top companies gained 1.15 per cent to close at 5,552.29 points, posting a gain of 7.51 per cent over the week that also saw top central banks move to ease commercial banks’ access to dollars.

In Paris the CAC 40 rose 1.12 per cent to 3,164.95 points for a gain of 10.78 per cent since last Friday and its sharpest weekly rise since November 2008.

Frankfurt’s DAX 30 put on 0.74 per cent on Friday to 6,080.68 points, a leap of 11 per cent for the week.

Milan rose 1.52 per cent and Madrid soared 1.63 per cent yesterday.

In foreign exchange deals, the European single currency slid late in the day to $1.3386 at 1700 GMT, compared with $1.3461 late in New York on Thursday, having risen over $1.35 during the session.

Wall Street climbed despite the jobs data actually being rather disappointing, with the Dow Jones Industrial Average up 0.59 per cent to 12,091.06 points nearing midday.

The tech-heavy Nasdaq Composite gained 0.70 per cent to 2,644.62 points, while the S&P 500, a broader measure of the markets, added 0.70 per cent to 1,253.25 points.

In its highly-anticipated monthly jobs market report, the Labour Department said the unemployment rate dropped to 8.6 per cent in November, its lowest level since March 2009.

It was the sharpest decline since last December, and surprised most analysts who forecast the jobless rate would be unchanged at nine per cent for a second straight month.

However the US economy created a net 120,000 jobs, slightly below the consensus estimate of 123,000, although this was 20 percent above October’s 100,000 reading.

“Market participants may ignore the fact that the unemployment rate did not fall only because of strong job creation, but also because the particip-ation rate fell,” said Jason Schenker at Prestige Economics.

Tensions on the eurozone bond market have eased significantly.

European Central Bank president Mario Draghi insisted on Thursday that the bank could not act as lender of last resort and that its actions to support the eurozone debt market were limited. But he also signalled that if EU governments ensured budget discipline, the ECB might have extra room for manoeuvre.