European markets rise on strong banks, corporate earnings

The U.S. Labor Department said in its report that initial jobless claims jumped to 637,000 for the week ended May 9. This was up 32,000 from the previous week's revised total of 605,000.

Separately, the U.S. Labor Department said that the producer price index rose 0.3% in April following an unrevised 1.2% decrease in March. Economists had been expecting a slightly more modest increase in prices of about 0.2%.

The core producer price index, which excludes food and energy prices, edged up 0.1% in April after coming in unchanged in the previous month. The modest increase came in line with economist estimates.

Crude for June delivery fell $0.82 to $57.20 a barrel on the New York Mercantile Exchange, by the time the European markets closed, as U.S. unemployment continued to rise and a new report predicted the world's petroleum appetite will shrink even more than expected this year.

The FTSEurofirst 300 index of pan-European blue chips closed 0.48% higher at 835.71 points, while the narrower DJ Stoxx 50 index rose 0.19% to 2,049.78 points.

Around Europe, the U.K.'s FTSE 100 index climbed 0.72% to 4,362.58, while France's CAC 40 index rose 0.11% to 3,156.29 and Germany's DAX index surged up 0.23% to 4,738.47.

Banking stocks rallied after the cost of borrowing in dollars for three months between lenders dropped the most in eight weeks. HSBC, Europe's largest bank, rose 1.7%, while Royal Bank of Scotland, Britain's second largest bank, surged up 4% and Barclays, the third largest, climbed 4.2%. Lloyds Banking Group, Britain's biggest mortgage lender, gained 3.8%.

Dutch insurer Aegon climbed 6.3% after the company posted a smaller-than-expected first quarter loss.

Portugal Telecom, Portugal's biggest phone company, surged up 8% after the company reported first quarter profit that beat analysts' estimate.