PARIS, Feb 2: European stocks rose on Thursday, bolstered by a bigger than expected drop in new US unemployment claims and the prospect of a mega Glencore-Xstrata mining merger.

After treading water in the morning, European stocks turned upwards after the US Labor Department reported that initial jobless claims, an indicator of the pace of layoffs, fell to 367,000 last week.

In mid-afternoon trading, the benchmark FTSE 100 index added 0.14 per cent to 5,798.55 points, while in Paris the CAC 40 climbed 0.32 per cent to 3,378.39 points and Frankfurt`s DAX 30 gained 0.35 per cent to 6,639.83 points.

Wall Street opened modestly higher on the initial jobless claims data that showed a continued trend towards improvement in the US labour market, with the Dow Jones Industrial Average rising 0.19 per cent to 12,740.95 points in the first five minutes of trade.

The broader S&P 500 added 0.21 per cent to 1,326.84 points, while the tech-heavy Nasdaq gained 0.24 per cent to 2,855.15 points.

Swiss-based mining companies Xstrata and Glencore unveiled a blockbuster $80 billion merger on Thursday that would create a commodities giant worth around $106.5 billion.

`Xstrata plc confirms that it has received an approach from and is in discussions with Glencore International plc regarding an all share merger of equals which may or may not lead to an offer being made by Glencore for Xstrata,` the former said in a statement to the London Stock Exchange.

The revelation sent their share prices soaring, with Xstrata surging 9.69 per cent to 1,228 pence, topping the FTSE 100 leaderboard,while Glencore jumped 6.58 per cent to 460.15 pence.`The news from this morning on the potential tie up for Glencore/Xstrata -or Glenstrata -has been a move many have expected over the last few months,` said Atif Latif, director of trading at Guardian Stockbrokers in London.

`Should the all-share merger of equals happen, it results in a game-changer for general commodity companies. This deal, if confirmed, will bring huge value to shareholders and is a sound fit for both companies and bring them both into line to compete with larger mining companies,` he added. However, news of the possible merger was not enough to push all markets back into positive territory during morning trading, as investors fretted over a raft of corporate earnings and ongoing worries over debt-laden Greece.

Energy giant Royal Dutch Shell said on Thursday that its 2011 net profit jumped by 54 per cent to $30.92 billion on the back of higher energy prices. But the Anglo-Dutch group also revealed that net profits slipped four per cent to $6.5 billion in the fourth quarter, due to lower industry refining margins and North American natural gas prices. In response, Shell`s `B` share price slid 1.25 per cent to 2,297 pence as investors baulked at the quarterly earnings.

Anglo-Swedish drugs giant AstraZeneca meanwhile said it would axe 7,300 jobs by the end of 2014 in a new cost-cutting drive, despite bumper annual profits. It also warned that earnings were expected to fall this year as patents on key drugs expire, sparking increased competition from generic drug-makers, and amid government intervention in Europe and the US.-AFP