Europe's stock markets rose on Friday before key US jobs data, after diving the previous day on fears of an inflation-induced recession.

Frankfurt won 1.5 per cent, London gained 0.7 per cent and Paris added 0.6 per cent after a subdued Asian session.

All three markets tanked on Thursday as record-high eurozone inflation fuelled fears that the European Central Bank will ramp up interest rates again next week, even as the region faces rocketing winter energy prices over Russia's war on Ukraine.

Elsewhere on Friday, oil prices rallied on fading expectations for an Iran nuclear deal anytime soon, but remain under pressure from issues including the strong dollar, China's renewed COVID lockdowns, and worries about a demand-sapping recession.

Oil prices rallied on fading expectations for an Iran nuclear deal anytime soon, but remain under pressure from issues including the strong dollar, China's renewed COVID lockdowns, and worries about a demand-sapping recession

Data 'commands attention'

All eyes are now on a key US non-farm payrolls (NFP) report slated for publication later on Friday, for clues on the Federal Reserve's interest rate outlook.

"This economic reading commands the most attention," noted AvaTrade analyst Naeem Aslam. "As always, the Fed will watch this data very closely and it is highly likely to influence their monetary policy decision."

With US rates expected to keep rising, the dollar has rallied to highs not seen for decades, including against the pound and euro.

Bets are now increasing on a third successive 75-basis-point increase at the Fed's September meeting. 

The dollar eased on Friday but held above 140 yen – one day after breaching the key level for the first time since 1998.

"Profit-taking was the name of the game as euro/dollar climbed back above parity, although dollar/yen continued to press ahead," noted City Index analyst Fawad Razaqzada.

Recent healthy readings on US factory activity, unemployment claims and private jobs creation indicated the world's top economy remained strong despite rising interest rates and four-decade-high inflation.

Wall Street ended Thursday with a late rally, with the Dow and S&P 500 snapping a four-day retreat, though the Nasdaq extended its losing streak.