European shares rose yesterday for the third consecutive session, with miners boosted after Australia left its interest rates unchanged and banks gained, but BP fell after its fourth-quarter results missed forecasts.

The pan-European FTSEurofirst 300 index of top shares closed up 0.9 per cent at 1,027.18 points after being down as low as 1,012.31 earlier.

"What's keeping the market higher today is investors coming in to pick up the miners following yesterday's good US ISM data and Australia deciding to keep interest rates on hold," said Joshua Raymond, market strategist at City Index.

"But we could start to see profit taking over the next few days ahead of the Bank of England rate decision and US jobless data later in the week."

Miners featured among the best performers as metal prices moved higher, with sentiment lifted after Australia's central bank unexpectedly kept interest rates on hold.

Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata rose 2.7 to 4.6 per cent.

Banks were also in demand. Barclays, BNP Paribas, Credit Suisse and Deutsche Bank gained 1.9 to 2.6 per cent.

Across Europe, the FTSE 100 index was up 0.7 per cent, Germany's DAX was one per cent higher and France's CAC 40 rose 1.3 per cent. However, energy shares fell. BP lost 3.8 per cent after the company reported a lower than forecast 33 per cent rise in fourth-quarter replacement cost profit and warned that an operational turnaround could slow this year.

"Guidance for 2010 production volumes of 'slightly lower than 2009' is a clear disappointment," analysts at Citigroup said in a research note.

"We expect this to take the shine off the consensus view that BP's operational momentum of 2008/9 can continue."

In economic news, pending sales of previously owned US homes edged up as expected in December, a survey showed, which should help to calm fears of renewed weakness in the troubled housing sector.