European shares rose on Friday, helped by a rebound in the battered banking sector, with investors attributing the rebound partly to the suspension of campaigning for Britain’s EU referendum following the shooting of a lawmaker.

The killing of pro-EU Member of Parliament, Jo Cox, on Thursday shocked the nation, prompting both the “Leave” and "Remain” camps to halt campaigning for the June 23 vote.

“Even if the vote goes ahead as planned, which presumably it will, yesterday’s events could damage pro-Brexit campaign,” CMC analyst Jasper Lawler said in a note.

Both the pan-European STOXX 600 and FTSEurofirst 300 indexes rose around 1.2 per cent by 0824 GMT, although they remained on course to end the week with a loss after falling near four-month lows in the previous session.

Worries that Britain, the world’s fifth-largest economy, could quit the European Union have dominated markets this week and driven investors towards safe-haven assets such as gold and German bunds and away from stocks.

Europe’s STOXX 600 Banks index rose 3 per cent as it rebounded from heavy losses seen in the previous session when British exit risks and new signs that interest rates would stay low for longer compounded the uncertainty surrounding the sector. The index has been the worst sectoral performer so far this year with a loss of around 26 per cent.

“By imposing stricter capital requirements European regulators and the ECB have helped avoid Lehman-type situations and valuations are so low that sooner or later banks will be seen as strong buying opportunities,” said Enrico Vaccari, fund manager at Italy's Consulti9nvest.

“As far as Brexit, I expect Britain to remain in the European Union and make up its mind like in the parable of the Prodigal son,” he added.

Shares in Bank of Ireland, Lloyds Bank, UniCredit, Deutsche Bank and Santander were among the top gainers among Europe’s top banks and on the FTSEurofirst. They were all up between 3.7 and 6 per cent.

The implied probability of a Remain vote in Britain rose to 65 per cent late on Thursday, according to Betfair odds.

Travel stocks were also in demand with company TUI rising 3.5 per cent after its CEO told a German newspaper the company saw record bookings in 2016.

Ericsson was among the top losers on FTSEurofirst, down 1.8 per cent, after a Swedish daily said the telecom gear maker is being investigated by US authorities over possible corruption related to its business in China. Ericsson spokesperson declined to comment on the report.

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