Gains by energy shares including BP and Total as well as a firmer Wall Street more than offset downbeat economic data from Germany yesterday to lift European bourses.

Shares ended modestly higher after a day of choppy trading punctuated by poor economic news, oil prices solidly above $55 a barrel and a series of mixed earnings reports.

By late afternoon, the FTSEurofirst 300 index of pan-European blue chips closed up 0.4 per cent at a provisional 1,076.70 points while the narrower DJ Euro Stoxx 50 index ended 0.35 per cent higher at 2,986.83 points.

Analysts pointed to a recovery on Wall Street after a battering early last week as one reason for slightly more positive sentiment in Europe. The Dow Jones industrial average was up 0.82 per cent at the European close.

"Some of the ground lost has been recovered this week, but investors remain in a jittery frame of mind," said John Kelly, head of client investment at Britain's Abbey, in a commentary.

Stocks were lifted by the oil sector, which gained 1.48 per cent as crude oil futures spiked higher. Energy companies were among the day's biggest gainers, with BP up 1.32 per cent and Total 1.20 per cent.

"Oil companies will increase their dividends further and engage in share buybacks," wealth manager LGT Bank told clients in its latest outlook. The bank recommended they continue building positions in the sector.

On the deal side, British oil exploration group Edinburgh Oil & Gas Plc received a bid approach from Dutch company Oranje-Nassau E&P Ltd and Dyas UK Ltd, sending its shares up 17.80 per cent.

But the flip side of higher oil prices is the worry that company costs will rise and profits sink. That went some way to capping the day's gains.

Sentiment also was depressed by Munich-based think tank Ifo's report that German business confidence fell this month for the third time in a row to a 19-month low.