European shares rallied on Thursday, after six days of declines, as banks and mining stocks rose, while the bid from Belgian brewer InBev for U.S. 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 percent.
BNP Paribas and Spain's BBVA rose 2.7 and 3.1 percent, respectively.
A reading of U.S. retail sales that beat forecasts helped support the broader market in afternoon trade as it suggested U.S. 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 percent to 1,261.11 points, making this its first rise since June 3.
However, analysts did not expect the rally in European equities to last long.
"We're up because there has been no bad news, we've had a bit of respite from the ongoing doom and gloom," said IG Index chief market analyst David Jones.
"At the moment it smells like an oversold rally so (the market) was going to come back at one point after the plunges we've seen this week, but I don't think anyone is too convinced as of yet."
HBOS rose 9.7 percent, having earlier fallen further below the level of its planned rights issue.
"There's a little bit of bottom-fishing going on, people did get very panicky yesterday," said Roger Cursley, a strategist at Investec in London.
"It's nervy out there," he added. "People were right to be shocked yesterday when they saw HBOS' rights issue under water."
Spain's Banco Popular rallied 6.7 percent after newspaper Negocio said a group of Mexican businessmen was considering a bid.
The bank said it was unaware of an offer.
Miners powered ahead, with Rio Tinto, one of the largest individual positive weights on the index, up 4.1 percent.
Vedanta rose 2.2 percent after a Goldman Sachs upgrade, while Xstrata added 4.9 percent after Goldman raised its price target on the stock.
Cheers to Beers
InBev rose 6.2 percent after it offered $46.3 billion for Anheuser-Busch.
Other brewers moved on the deal.
SABMiller, once seen as a possible takeover target for InBev, fell 3 percent, while Heineken rose 2 percent.
Oil stocks Royal Dutch Shell and Total eased in line with crude oil paring some of Wednesday's hefty gains.
Shell and Total fell 1 to 1.5 percent, while BP was up just 0.4 percent.
The surge in the oil price this year, which has triggered growing concern from policymakers in the United States, Britain and the euro zone, has weighed on equities.
"The price of energy is going to stay high for longer," said Bruno Berry, European equities fund manager at Morley in London.
"Every time you break a record somebody is going to try and break the next one, it's like in sport."
On the downside, Carphone Warehouse, Europe's biggest independent mobile phone retailer, fell as much as 18.6 percent to all-time lows after saying it had seen falling broadband demand due to a slowdown in the housing market and was cautious about the year ahead.
Carphone Warehouse shares ended down 11.1 percent.