European shares notched up a fifth straight week of gains, as the outlook for the global economy improved and on optimism Greece would avoid a messy default.
However, equities suffered a slight reversal on Friday on weaker resources stocks and with Novartis lower amid doubts about a key drug.
The pan-European FTSEurofirst 300 index of top shares fell 0.3 percent to close at 1,043.06 points.
Over the week, the index rose 2.5 percent, its fifth weekly advance in a row, having on Thursday hit its highest mark in more than five months.
The benchmark is up more than 22 percent from a yearly low in September and has neared overbought territory, with its Relative Strength Index (RSI) coming close to 70.
The RSI is a technical momentum indicator that determines overbought and oversold conditions, with values of 70 and above considered overbought.
Economic data, including manufacturing activity indicators and strong labor data from the US, the world’s biggest economy, has boosted investor confidence in the early part of this year.
“Some key cyclical indicators have turned, and the German ZEW [confidence index] this week was very strong,” said Daniel McCormack, strategist at Macquarie.
“That has surprised the market. This rally still has a way to run, as some investors haven’t bought back in yet,” he added.
Greece was closing in on an initial deal with private bondholders on Friday. This would prevent it from tumbling into a chaotic default, but result in investors losing up to 70 percent of what they have loaned to Athens.
The STOXX Europe 600 Banking Index rose 0.9 percent, having gained 6.2 percent in the previous session, following successful bond auctions in the eurozone region.
Some strategists remained sceptical.
“The underlying problems of the eurozone still persist and, given the seasonal nature of US economic data, it is perhaps too soon to read too much into recent jobs data,” said Oliver Wallin, investment director at Octopus Investments. “As a result, we’ve been holding our positions and have made no major changes to the portfolios this week. We retain our historically high cash weightings across the range.”
Resources stocks were the other main drag on the index on Friday, following concern about China’s contracting manufacturing sector.
The STOXX Europe 600 Basic Resources Index fell 0.7 percent.
The STOXX Europe 600 Oil & Gas Index fell 1.7 percent, tracking crude prices lower.