European shares were higher in early trade on Thursday as a surprise quarterly profit from U.S. aluminium group Alcoa (AA.N) boosted market sentiment, with banks and mining stocks the biggest gainers.

By 0834 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was up 1.2 percent at 1,000.41 points, ahead of the European Central Bank and the Bank of England's interest rate decisions.

The benchmark slipped 0.4 percent on Wednesday. It is up 20 percent this year and has surged almost 55 percent since hitting a record low in early March.

Alcoa posted a surprise profit on Wednesday through cost cutting and higher aluminium prices after three consecutive quarterly losses.

Alcoa had better than anticipated results, which is good. It is now all about anticipating quarter-three earnings. There is a general sense that quarter-three earnings are going to be more positive than expectations, said Bernard McAlinden, market strategist at NCB Stockbrokers.

Miners featured among the best performers. Anglo American (AAL.L), Antofagasta (ANTO.L), BHP Billiton (BLT.L), Eurasian Natural Resources Corporation (ENRC.L), Rio Tinto (RIO.L) and Xstrata (XTA.L) gained 2.5 to 4.1 percent.

A drop in the Australian jobless rate also helped fuel positive sentiment about the demand for raw materials.

Banks added the most points to the index. HSBC (HSBA.L), Banco Santander (SAN.MC) and Societe Generale (SOGN.PA) were up 0.8 to 2.1 percent.

But Lloyds Banking Group (LLOY.L) missed out, shedding 2.8 percent. The Financial Times reported the part-nationalised lender was sounding out investors about a 15 billion pound ($24 billion) rights issue to help it avoid a government scheme to insure against credit losses.

ABB GAINS

Swiss engineering group ABB (ABBN.VX) gained 3.2 percent after it said it had renewed a $2 billion revolving credit facility to replace an existing facility signed in 2005 and due to expire in 2010.

The world's biggest truckmaker, Daimler (DAIGn.DE), was 2.3 percent higher after it said it could be profitable at current sales levels and is seeing evidence that the U.S. truck market has bottomed.

After a lacklustre day yesterday, the markets are back in buying mode. Everything is painting the picture that the global economy is back in better health, said Jim Wood-Smith, head of research at Williams de Broe.

On the downside, Ladbrokes (LAD.L), Britain's biggest bookmaker, fell 6.2 percent after it said it planned to raise 275 million pounds through a rights issue priced at a discount of nearly 50 percent to its closing price on Wednesday.

Later in the session, investors are likely to eye rate decisions by the Bank of England and the European Central Bank.

The European Central Bank is expected to keep interest rates at a record-low 1.0 percent on Thursday and its head Jean-Claude Trichet will probably caution against high hopes of a speedy economic recovery.

The Bank of England rate-setters are likely to sit tight and leave Britain's loose monetary policy unchanged this month, waiting until updated economic forecasts in November before deciding whether to alter the setting.

Across Europe, the FTSE 100 .FTSE index was up 0.9 percent, Germany's DAX .GDAXI was 1.2 percent higher and France's CAC 40 .FCHI gained 1.4 percent.