US and European shares rebounded from recent weakness on Friday, with reassuring US retail sales data boosting sentiment, while US crude prices rallied from more than 12-year lows.

Banking shares in the United States and Europe spiked, with the S&P financial index closing up 4 per cent and the STOXX 600 Europe Banks index gaining 5.6 per cent.

The US S&P 500 gained about 2 per cent after five days of losses that had dropped it to its lowest level in two years on Thursday, but still posted its second straight weekly decline.

In Europe, advances in shares of Deutsche Bank and its rival Commerzbank of 11.8 per cent and 18 per cent, respectively, helped European stocks rebound.

The FTSEurofirst 300 index of top European shares notched its biggest daily gain in five and a half months after hitting a two-and-a-half-year low on Thursday. The index ended up 3.04 per cent at 1,232.09.

The S&P financial index has fallen more than 14 per cent this year, and the European bank index nearly 25 per cent, battered by intensified worries about the impact of central banks' negative interest rate policies on banks' profitability.

Commerce Department data showing US retail sales excluding automobiles, gasoline, building materials and food services increased 0.6 per cent in January also boosted optimism.

"Europe was strong, especially the banks, and that appeared to have some positive carryover effect on banking stocks here in the US," said John Carey, portfolio manager at Pioneer Investment Management in Boston.

MSCI's all-country world equity index, which on Thursday closed more than 20 per cent below its all-time high to confirm a bear market in global equities, rebounded 3.9 points, or 1.1 per cent, to 357.25. Mainland China markets reopen on Monday after the Lunar New Year holiday.

US stock and bond markets will be closed Monday for the Presidents Day holiday.

On Friday the Dow Jones industrial average ended up 313.66 points, or 2 per cent, at 15,973.84. The S&P 500 closed up 35.7 points, or 1.95 per cent, at 1,864.78. The Nasdaq Composite closed up 70.68 points, or 1.66 per cent, at 4,337.51.

The S&P energy index ended up 2.6 per cent. Oil prices surged on prospects for a coordinated production cut sparked by comments from the energy minister of OPEC member United Arab Emirates.

US crude settled up 12.32 per cent at $29.44 a barrel after hitting $26.05 a barrel on Thursday, a more than 12-year low. Brent crude settled up 10.98 per cent at $33.36 a barrel.

Safe-haven 10-year Treasury notes were last down 27/32 in price to yield 1.74 per cent after hitting 1.53 per cent Thursday, their lowest yield since Aug. 2012.

"The upbeat retail numbers provided a rebound and the fear-trade we saw all week seems to have moved on for now," said Kathy Jones, chief fixed income strategist at Charles Schwab & Co. in New York.

The dollar index, which measures the greenback against a basket of six rivals, was last up 0.4 per cent.

Spot gold was down 0.7 per cent at $1,237.66 an ounce, but has risen 5.5 per cent this week, on track for the biggest weekly gain since October 2011. – Reuters