European markets rally after setbacks earlier in the week

Leading European stock markets closed higher on Friday, rallying after a largely negative week as Wall Street opened on the upbeat and higher oil prices boosted heavyweight oil stocks.

The London FTSE 100 index gained 0.82 percent at 5,312.60 points, while in Frankfurt the DAX 30 shot up 1.62 percent to 4,929.91 and in Paris the CAC 40 climbed 1.31 percent to 4,487.90.

The DJ Euro STOXX 50 index of leading eurozone shares advanced 1.35 percent to 3,328.17.

Meanwhile, US stocks forged higher as investors snapped up shares made cheap by recent declines, while a UBS upgrade of Coca-Cola and an upbeat news release from Caterpillar lifted the Dow Jones Industrial Average.

At London's close, the Dow was up 57 points at 10,612.

Back in Europe, oil stocks lent support, as positive broker comment prompted investors to buy into recent dips, with sentiment further boosted by a spike in crude prices as Ecuador halted exports to the US amid violent protests in the country.

In London, Royal Dutch Shell B shares were up 1.41 percent at £18.66, BP rose 1.44 percent to £6.33 and BG added 0.56 percent at £4.94. In Paris, Total rallied 1.69 percent to 210.40 euros.

British mobile operator O2 was the top FTSE 100 performer, surging 3.36 percent to £1.54 amid ongoing speculation it is being eyed as a takeover target by German giant Deutsche Telekom.

Mining stocks were also in demand, again rebounding after recent weakness, and with BHP Billiton 1.55 percent firmer at £8.19, boosted by Merrill Lynch raising its 2006-'08 earnings forecast by 4.0 percent.

Elsewhere, cruise operator Carnival was given a fillip by press reports the US State Department has withdrawn its proposed deadlines for passport requirements for travellers to the Caribbean, Mexico and Canada. Carnival gained 1.10 percent at £29.39.

In the defense sector, BAE Systems added 2.38 percent at £3.2250 after the Financial Times reported that seven defense groups will be asked tomorrow to examine the books of Atlas Elektronik, the German naval systems group that BAE has put up for sale.

In Paris, EADS closed up 1.76 percent at 27.13 euros. A spokesman said it was "interested in the consolidation of the marine electrics sector including Atlas."

On Thursday, CIT Group placed a US$2.2 billion order for 29 planes from EADS's subsidiary Airbus.

Meanwhile, shares in German-US car maker DaimlerChrysler raced 3.16 percent higher to 42.17 euros in Frankfurt as investors welcomed a management shakeup announced on Thursday.

Elsewhere in Europe, the Swiss Market Index rose 0.61 percent to 6,636.58 points.

The Amsterdam AEX added 0.66 percent at 393.97, the Brussels BEL-20 climbed 0.59 percent to 3,272.11, the Madrid IBEX-35 gained 0.95 percent at 10,132.9 and the Milan SP/MIB jumped 1.47 percent to 33,724.0.