European shares closed higher on Thursday as investors took in stride a stronger-than-expected U.S. jobs report, with bank stocks leading gains as focus remained on a potential trade deal between the European Union and the United States.

The pan-European STOXX 600 index (.STOXX), closed 0.5% higher, in tandem with a 0.9% rise in the U.S. S&P 500 (.SPX), Germany's DAX (.GDAXI), advanced 0.6%, while France's CAC 40 (.FCHI), added 0.2%.

U.S. job growth was unexpectedly solid in June, with the nonfarm payrolls reading shooting above market estimates for the month.

"Today's good news should be treated as such by the markets, with equities rising despite the accompanying pickup in interest rates," said Jeff Schulze, head of economic and market strategy at ClearBridge Investments.

U.S. interest rate futures show traders betting on a September start to Federal Reserve rate cuts and a total of just two quarter-point reductions by yearend, not the three rate cuts that they had favoured prior to the data.

Banks (.SX7P), were the biggest boost to the STOXX 600, with British lenders Natwest and Lloyds (LLOY.L), leading the charge at a more than 3% rise each.

British stocks, bonds and the pound stabilised after losses on Wednesday as Prime Minister Keir Starmer's office rushed to give finance minister Rachel Reeves his full backing after she appeared in tears in parliament.

Source: Reuters