European shares rallied yesterday, after six days of declines, as banks and mining stocks rose, while the bid from Belgian brewer InBev for US rival Anheuser-Busch boosted beverage stocks.

Banks bounced back from recent losses as an index of European banks staged its first rise since June 3, with leaders including Royal Bank of Scotland which rose 7.9 per cent. BNP Paribas and Spain's BBVA rose 2.7 and 3.1 per cent, respectively.

A reading of US retail sales that beat forecasts helped support the broader market in afternoon trade as it suggested US consumer spending - a key driver of economic growth - was holding up better than expected in spite of record-high energy prices and the ongoing credit crunch.

The FTSEurofirst 300 index rose 0.9 per cent to 1,261.11 points, making this its first rise since June 3. Around Europe, Britain's FTSE 100 was up 1.2 per cent, Germany's DAX rose one per cent and France's CAC edged up 0.2.

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