World stocks rose toward this week's 7-1/2 month high on Friday as resource stocks rallied after oil prices surged past $69 a barrel and optimism grew about an improving U.S. labor market ahead of key jobs data.

The day's biggest loser was sterling, which was hit by concerns about UK political uncertainty after a senior minister quit the government and called for Prime Minister Gordon Brown to resign.

European share markets were pulled higher by Rio Tinto and BHP Billiton , which rose more than 9 percent after the former scrapped a $19.5 billion tie-up with China's Chinalco, a move which would lighten its big debt burden, and announced an iron ore joint venture with BHP.

Thursday's data showing a drop in U.S. weekly jobless claims built expectations for a closely-watched monthly employment report due later and underpinned expectations that the world's biggest economy is improving.

The overall sentiment is pretty good, said Ralf Groenemeyer, investment strategist at Silvia Quandt Research in Frankfurt. The market is benefiting from better than expected economic sentiment indicators which suggest that we will have a stronger economy in the second half (of 2009), he said, adding: Wishful thinking is sufficient to drive markets higher.

MCI world equity index <.MIWD00000PUS> rose 0.4 percent, edging toward this week's October high.

The FTSEurofirst 300 index <.FTEU3> rose 0.7 percent. Emerging stocks <.MSCIEF> rose 1 percent.

U.S. stock futures rose around 0.5 percent, pointing to a firmer open on Wall Street.

U.S. crude oil rose 0.8 percent to $69.35 a barrel. The rise comes on top of a 4-percent gain on Thursday.

The June bund futures fell 25 ticks.

The dollar <.DXY> was steady against a basket of major currencies.


Sterling is the day's biggest underperformer, falling to a one-week low of $1.6017 after political turmoil facing intensified, prompting the prime minister to move forward a cabinet reshuffle.

Against the euro, it fell 1 percent to a 2-week low of 88.66 pence.

Early results in Thursday's local elections in the UK suggested a drubbing for the ruling Labor Party. Four ministers have quit the government so far, with one publicly urging Brown to step down to improve the Labor Party's chances at the next general election.

People outside the UK hadn't appreciated how bad the political situation in the UK was becoming and the idea that Gordon Brown might be taken from office came as a shock, Neil Mellor, currency strategist at Bank of New York Mellon said.

Traders also noted that news that UK mining company Rio Tinto is planning a $15.2 billion rights issue was also weighing on sterling.

(Additional reporting by Peter Starck and Jessica Mortimer; Editing by Andy Bruce)