European stocks ended higher yesterday, snapping a three-session losing streak as buoyant metal prices sparked a strong rally in mining shares, while energy stocks gained ground as oil prices rose. The FTSEurofirst 300 index of top European shares closed 1.9 per cent higher at 1,162.15 points.

The index gained 3.3 per cent during the roller-coaster week that started with a sharp jump on Monday following the announcement of the rescue by the US government of embattled mortgage firms Fannie Mae and Freddie Mac.

London Metal Exchange copper, tin, nickel, lead and zinc jumped between three and six per cent yesterday as traders cited short covering. A soft dollar against the euro also helped to push prices higher.

Rio Tinto, Xstrata, BHP Billiton and Anglo American soared between 7.3 per cent and 8.4 per cent. Energy shares were also among the biggest gainers as oil prices rose, on worries over the potential impact of Hurricane Ike. Total rose 2.2 per cent and BP added 1.6 per cent. Strong consumer sentiment data also fuelled the market's rally. The Reuters/University of Michigan sentiment index jumped to 73.1 in September from 63.0, and was far above the consensus forecast of 64.0.

Banking stocks gained ground on rising hopes for a bid for troubled Wall Street firm Lehman Brothers.

The Financial Times yesterday said, citing people familiar with the matter, that Bank of America Corp, JC Flowers & Co. and the Chinese sovereign wealth fund China Investment Co. were considering a possible joint bid for Lehman. Barclays gained 3.6 per cent, Credit Suisse rose 3.2 per cent and Societe Generale added 1.8 per cent. Around Europe, Germany's DAX index gained 0.9 per cent, UK's FTSE 100 index rose 1.9 per cent and France's CAC 40 added two per cent.