By Sarah Turner

LONDON (Dow Jones)--British stocks advanced Friday, as Rio Tinto soared in the mining sector and other mineral extractors also posted strong gains.

Overall, the FTSE 100 index gained 1.2% to 4,438.56. Other European shares also surged, while stocks notched a higher open across the Atlantic.

Data showed that 345,000 payroll jobs were lost in the U.S. in May, but the figure was much better than the 500,000-lost-jobs figure economists had been expecting.

"The story that the world economy is recovering does appear to be benefitting the U.K. market," Commerzbank strategist Peter Dixon said, citing London's heavy weighting toward commodities.

In the mining sector, shares of Rio Tinto (RTP) jumped 10.3%, while BHP Billiton (BHP) advanced 6.8%.

Rio Tinto said Friday that it's decided to reject a $19.5 billion deal to sell part of itself to China's Aluminium Corp. and announced the launch of a heavily discounted rights issue to raise about $15.2 billion in gross proceeds.

Rio Tinto also said that it will establish a production joint venture with BHP Billiton that will cover the companies' respective iron-ore assets located in western Australia.

Rio and BHP Billiton pegged the value of production and development synergies expected to arise from the venture at more than $10 billion. BHP Billiton is to pay Rio Tinto $5.8 billion.

"The Chinalco transaction was seen as bad for the group," noted Charles Kernot, analyst at Evolution Securities.

It was viewed as trampling shareholders' pre-emption rights, and there were further complications posed by stakes that Chinalco wanted in Rio Tinto's assets, he noted.

Other metal stocks also advanced, with shares of Vedanta Resources adding 9.3% and Eurasian Natural Resources rising 7.3%.

Natural-gas producer BG Group climbed 3.5%. The company said that another well in the pre-salt Santos Basin, offshore Brazil, had encountered hydrocarbons.

In the currency markets, sterling was pressured Friday, down 0.8% at $1.60 against the dollar.

British Prime Minister Gordon Brown began a reshuffle of his cabinet in a last-ditch bid to save his own job and beat back an intramural challenge within his Labour Party.

Shares of Carphone Warehouse declined 0.6%.

The retailer's fiscal-year net profit jumped to 550 million pounds ($882 million), up from 73 million pounds in the prior year. The disposal of 50% of the group's retail and distribution business resulted in a net gain after taxes of 608 million pounds.

Still, revenue dipped to 1.39 billion pounds, from 1.42 billion pounds last year.

-Sarah Turner; 415-439-6400; AskNewswires@dowjones.com