* FTSEurofirst 300 up 0.5 percent
* Investors await U.S. non-farm payrolls data for direction
* Automobile shares feature among top gainers
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By Atul Prakash
LONDON, March 4 (Reuters) - European shares rose on Friday on growing optimism a key jobs report will show the recovery in the United States, the world's largest economy, gathering momentum.
Automobile shares were among the top gainers, with a sector index rising 1.5 percent on hopes of improving demand. Daimler rose 1.7 percent.
A signal by the European Central Bank on Thursday it may raise interest rates as early as next month hurt some banks in peripheral euro zone countries, while a rebound in crude oil prices on tensions in Libya prompted investors to stay cautious.
At 0925 GMT, the FTSEurofirst 300 index of top European shares was up 0.5 percent at 1,162.20 after gaining 0.2 percent on Thursday.
The U.S. jobs report, due at 1330 GMT, was expected to show employers hired more workers in February than in any month since May. Nonf-arm payrolls rose 185,000, according to a Reuters survey, after 36,000 jobs in January.
"It is always dangerous to depend too much on such a volatile series of data. The jobs report does come against still challenging conditions in the Middle East and a positive set of numbers would certainly be well received by the market," said Keith Bowman, equity analyst at Hargreaves Lansdown.
Economists said the U.S. Federal Reserve will want to see payroll gains in excess of 200,000 for at least 6-9 months and a significant decline in unemployment before starting to withdraw its monetary support from the economy.
JOBS IN FOCUS
A fund manager said the investment focus had shifted to economic fundamentals from geopolitical tensions in Libya.
Libyan rebels calling for air strikes to set up a "no-fly" zone came under attack by warplanes for a third day on Friday as Muammar Gaddafi tried to loosen the opposition's expanding grip on a key coast road.
Crude oil prices rose 1 percent to hover above $116 a barrel on concerns the crisis could spread to other oil producers in the Middle East.
"The markets only seem to be able to concentrate on one or two things at a time," said Richard Greenwood, fund manager at Bedlam Asset Management, referring to U.S. jobs data.
"The economic data is getting better for the developed world and corporates are generally cash rich. I am still positive about the equity market and think that equities are a better place than bonds."
Across Europe, Britain's FTSE 100, Germany's DAX, France's CAC 40 rose 0.7-1.1 percent, but Spain's IBEX, up 0.4 percent, underperformed on concerns that higher lending rates would hit a fragile recovery in the highly indebted country.
Spanish lenders were under pressure, with Bankinter down 0.3 percent and Banco de Valencia down 0.2 percent.
Among individual movers, the world's largest advertising firm WPP fell 1.8 percent, with analysts saying its strong results lagged those of French rival Publicis.
"Publicis shot the lights out with fourth-quarter organic growth of 12.5 percent, so there is relative disappointment," said Simon Baker, analyst at Credit Suisse. (Reporting by Atul Prakash; Editing by Dan Lalor)