* FTSEurofirst 300 posts biggest weekly gain in 8 weeks
* U.S. jobs data supports, but caution following ISM numbers * Financials, miners among top gainers
By Atul Prakash
LONDON, Sept 3 (Reuters) - European shares hit a three-week closing high on Friday and posted their biggest weekly gain in about eight weeks as investors grabbed equities after figures showed that U.S. employment declined far less than expected in August.
However caution prevailed as an industry report said the U.S. non-manufacturing sector grew in August for an eighth straight month but at a slower pace than July and at a rate that was below expectations.
The FTSEurofirst 300 index of top European shares ended 0.8 percent firmer at 1,063.70 points -- the highest close since early August -- after rising to a high of 1,070.33 earlier in the session. The index climbed 3.6 percent during the week, its best weekly performance since early July.
"I would not expect, on the basis of the numbers that we have seen today, risk appetite to come back strongly, but the immediate concerns that the U.S. economy could drop back in recession were eased a bit on balance," said Klaus Wiener, head of research at Generali Investments.
"There is still positive labour income growth, investment spending is rising and I think that the residential housing market will now bottom out. What we need for the equity market to rise more from here is a bit more visibility."
U.S. employment fell much less than expected in August and private hiring surprised on the upside. The latest macroeconomic numbers lessened concerns that the economy, the largest in the world, risked sliding back into recession.
Concerns about a double-dip recession had already diminished somewhat this week as data showed strength in U.S. manufacturing and gains in consumer spending but the sluggish pace of growth had kept investors on edge.
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For a graphic on non-farm payrolls, click:
http://link.reuters.com/fym39n
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Financial shares, which derive strength from a robust economic environment, featured among the top gainers, with the STOXX Europe 600 banking index rising 1.5 percent. Barclays, Societe Generale, Credit Agricole and Credit Suisse jumped 3.2 to 4.2 percent.
According to StarMine data, the banking sector has one of the highest 12-month forward earnings growth rates at 68.2 percent, compared with the STOXX 600 average of 23.5 percent.
MINERS GAIN
Miners rose on hopes the global economic recovery will not get derailed. Stronger base metals also supported the sector, with BHP Billiton, Anglo American, Rio Tinto and Xstrata rising 1.3 to 1.9 percent higher.
Worries over the state of the global recovery have somewhat eased this week on surprisingly strong manufacturing data from the United States and China, while economic figures from Australia also improved confidence.
Shares in the STOXX Europe 600 looked cheap. Its one-year forward price-to-earnings stood at about 9.96, against a 10-year average of 13.68, Thomson Reuters Datastream showed.
The technical picture improved, with the Euro STOXX 50, the euro zone's blue-chip index, closing above 2,738 -- its 50-percent Fibonacci retracement of a fall to a low in May from a high in April.
The index, which rose 1.1 percent to 2,746.23 points on Friday, faced resistance at around 2,783 -- its 200-day moving average and further at 2,850 -- the last month's high.
But some analysts remained cautious.
"It's certainly been a cracking start to what can often be a tumultuous month for equity markets but surely very few will be thinking the pace can be sustained," said Will Hedden, sales trader at IG Index.
Among individual shares, Autonomy extended the previous session's gains and ended 3.4 percent higher. M&A speculation that the software company could find itself at the centre of a takeover battle between Microsoft and Oracle boosted the stock on Thursday.
Aggreko, the world's largest provider of temporary power, climbed 5.5 percent, with traders citing talk on FT Alphaville that it may be the subject of bid interest from Swiss engineering group ABB. Aggreko declined to comment. (Editing by David Cowell)