European Shares Head for Best Week in Three Years

European stocks resumed their brisk rally on Friday on hopes of upbeat U.S. jobs data and a bold solution to the euro zone debt crisis at a Dec. 9 summit.

At 0942 GMT, the FTSEurofirst 300 index of top European shares was up 1.1 percent at 987.03 points, on track to post a weekly gain of 8.7 percent, its biggest since the onset of the financial crisis in late 2008.

Late on Thursday, French President Nicolas Sarkozy called for a new treaty incorporating tougher budget discipline, a European Monetary Fund to support countries in difficulty and decisions in the euro area taken by majority vote instead of unanimity.

"Good speech ahead of the summit on Dec. 9, laying out the broad lines for the new Europe: more solidarity, more discipline, more political responsibility," a Paris-based trader said.

The euro zone's blue chip Euro European STOXX 50 index was up 1.5 percent at 2,348.71 points, breaking above a key resistance level, the 61.8 percent retracement of the index's drop from a peak in late October to a low hit last Friday.

Banking stocks surged, with Commerzbank up 4.3 percent and BNP Paribas up 5.6 percent. The STOXX euro zone bank index has soared 17 percent since hitting a near three-year low last Friday.

Investors were also reassured after the new president of the European Central Bank Mario Draghi signalled on Thursday it is ready to take fresh steps to tackle the euro zone debt crisis, saying risks to the economy have grown.

"The tone from the European Central Bank is starting to move in the right direction and solutions for Europe are taking shape," said Franklin Pichard, director at Barclays France.

"It's when the economy is looking into the abyss that political leaders usually make the crucial decisions, and we hope they will do just that on Dec. 9. Yes, we still believe in Santa Claus."

The Euro STOXX 50 volatility index, Europe's yardstick of investor sentiment known as the VSTOXX, was down 3.9 percent at 35.11, a level not seen since late October, signalling a rise in investor appetite for risky assets such as equities.

The market's huge volatility over the past three months has spooked long-term investors, leaving the market to short-term stock and derivative traders playing intraday moves using alternative strategies ranging from technical analysis to quant trading.

"The market has become more and more opaque, it's been very difficult for long-term investors," said Philippe de Portzamparc, CEO of French broker Portzamparc, which specialises in small and mid-size companies.

"We favour a return to investments made into the real economy and away from exotic financial products. The industry has to reverse the disastrous image of a financial market ruled by algorithmic programmes and high frequency trading."

On the macro side, investors were hoping for a strong reading from the U.S. job market, with economists expecting U.S. nonfarm payrolls, due at 1330 GMT, to have risen by 122,000 last month, which would outpace October's 80,000.

Around Europe, UK's FTSE 100 index was up 1.4 percent, Germany's DAX index up 1.2 percent, and France's CAC 40 up 1.3 percent.