European equities rose yesterday on hopes of cheaper oil prices, but the market was hamstrung by the euro's rise to record highs against the dollar.

Shares in Telefonica Moviles lost 2.35 per cent to €8.72 after the Spanish mobile phone operator reported a lower-than-expected rise in third-quarter profit and cut its outlook for the full year.

The basic resources sector rallied nearly two per cent after Morgan Stanley said European mining firms would be under increasing pressure to hand cash back to investors through share buybacks or dividend increases.

The FTSEurofirst 300 index ended 0.18 per cent stronger at 1,021.9 points on modest volume of €2.59 billion. The narrower DJ Euro Stoxx 50 index added 0.27 per cent to 2,872.7 points.

"The market is focusing more on oil than on the dollar move," said Jacob de Tusch-Lec, a European equity strategist at Merrill Lynch. "As long as oil comes down, European equities will do well irrespective of the dollar."

US light crude rose slightly to $47.85 a barrel, after earlier falling to $46.96, some 14 per cent below its all-time high two weeks ago.

The dollar meanwhile fell to a record low of $1.30 to the euro in a technically driven sell-off that followed a report on a narrower US trade gap, before regaining some ground.

A stronger-than-expected US payrolls report last week has stoked worries in the equity market that the US central bank will raise rates more aggressively than thought.

"The real question is whether we are going to see continued job creation in the US and if that turns into a strong trend," said Tusch-Lec.