European shares inched up on Friday, as investors took advantage of the past two sessions' losses to snap up equities more cheaply, reassured by a run of solid data from China, Europe and the United States.

An above-forecast reading on the U.S. manufacturing sector from the Institute for Supply Management (ISM), coupled with upward revisions for previous months' non-farm payrolls offered proof of recovery in the world's biggest economy.

That helped equities build on earlier gains after purchasing managers indexes pointed to stabilisation in the euro zone and a mild recovery in China.

The pan-European FTSEurofirst 300 Index provisionally closed 0.3 percent higher at 1,167.62 points, clawing back some of the retreat suffered in the previous two sessions and edging towards a 2-year peak of 1,178.55 set earlier in the week.

"Given the trauma that equities have been through in the last few months, people want things to be positive. There are hurdles ahead but people are just willing the markets to do really well," said Neil Marsh, strategist at Newedge.

"There is a gradual trend upwards and I don't see that stopping at the moment."

A leading pan-European stock index fell on Thursday, hit by drops in brewing group AB Inbev and oil major Shell, and some expected further weakness in the near term.

The pan-European FTSEurofirst 300 Index provisionally closed down 0.2 percent at 1,168.35 points, while the euro zone's blue-chip Euro STOXX 50 index fell 0.8 percent to 2,710.04 points.

AB Inbev slumped 7.6 percent to take the most points off the broader index after the U.S. Justice Department filed a lawsuit seeking to stop it from a full takeover of Mexican brewer Grupo Modelo.

Royal Dutch Shell also retreated by roughly 3 percent after its fourth-quarter results significantly undershot expectations.

Rupert Baker, who handles European equity sales at Mirabaud Securities, said there could be a near-term pull back on European equity markets but he expected an eventual recovery.

"The market has had a strong run and it's now topping out a bit. But there is still a bullish underbelly which has not been derailed yet," he said.

European shares suffered their biggest daily drop this month after gloomy earnings and weak U.S. economic data hit sentiment on Wednesday and left some positioning for further falls in the near-term.

European equities scaled fresh two-year highs on Tuesday, boosted by miners, as optimism about economic recovery gained momentum following encouraging U.S. home price data and comments over growth in top metals consumer China.

A report earlier showed U.S. home prices rose in November, adding further to evidence of a housing market recovery there. China's top think tank, meanwhile, lifted its economic growth forecast for 2013 to 8.4 percent from 8.2 percent, with faster expansion seen in the first half of the year.

The pan-European FTSEurofirst 300 provisionally ended up 0.5 percent at 1,178.55, its highest close since Feb. 18, 2011, taking the rally off its June lows to around 24 percent. Mining stocks ended the day up 1.8 percent.

Fund managers said that while there was the possibility that equities would level off after such hefty gains, they deemed a significant near-term sell-off as unlikely.

"You will get to the point where that squeeze higher will have absorbed all of the cash that was destined to go into equities and it's at that point markets will be vulnerable - but I don't think we're there yet," said Andrew Cole, a fund manager at Baring Asset Management, which has 32.4 billion pounds ($50.9 billion) of assets under management.

London's FTSE 100 posted the biggest gains out of the country-specific stock indexes, as a result of the rally in mining stocks, which came after Anglo American said it will take a $4 billion impairment charge on its Minas-Rio project, indicating it expects the much-delayed project to eventually commence. The charge was in line with analysts' expectations.

European equities touched fresh multi-month peaks on Monday, with technical charts pointing to a continued slow grind higher backed by tentative signs of improvement in the global economy and corporate earnings.

The Euro STOXX 50 provisionally closed 0.1 percent higher at 2,746.22 points, setting fresh 18-month peaks in the wake of stronger-than-expected U.S. durable goods orders showing firms in the world's biggest economy had stepped up spending. Durable goods orders jumped 4.6 percent in December, higher than the expected 1.8 percent rise.

The daily moves on the euro zone blue-chip index have averaged less than 10 points since Jan. 3, less than half of the usual size for 2012.

"It's not the top [of the market] but it's not going to accelerate, it's a slow market and you just have to be patient," said Valerie Gastaldy, analyst at Day By Day.

"As long as we are above [technical support at[ 2,723 we can aim for 2,790. We are not that overbought because we've been very, very slow."

The pan-European FTSEurofirst 300 Index was down 0.1 percent at 1,173.77 points after touching a two-year intra-day peak of 1,176.19 plans.

The travel and leisure sector was one drag on the pan-European FTSEurofirst 300 Index, led lower by budget airlines Ryanair and easyJet, which retreated after a recent surge.

Ryanair shed 1.5 percent after it reported strong growth in European fares in the fourth quarter but warned of marginal passenger growth in 2013, capped by a slow-down in plane deliveries.

EasyJet fell 1.8 percent on news of the departure of chairman Mike Rake, who has endured a strained relationship with majority shareholder Stelios Haji-Ioannou.

Banks rallied further after Friday's announcement that lenders made hefty early repayments of emergency funding from the European Central Bank, a sign at least parts of the financial system are returning to health.

Weak GDP data for the U.K. wasn't enough to stop European shares rising on Friday as Germany's DAX Index reached a level not seen since January 2008 after business climate data was released.

European shares closed higher Thursday, with the market taking direction from an opening rise on Wall Street where the S&P 500 hit the 1,500 mark for the first time since December 2007.

European shares inched higher on Wednesday, with a key index moving back towards a near two-year high hit recently, although a bout of profit taking on banking and insurance shares limited the market's rise.

Corporate results were in the spotlight, with shares of Unilever gaining 3.1 percent after the consumer-goods giant posted better-than-expected sales while Novartis added 4.1 percent after the Swiss pharmaceuticals group unveiled a reassuring sales growth forecast. In addition, global software maker SAP issued an operating profit outlook that topped estimates.

The pan-European FTSEurofirst 300 Index of top European shares provisionally closed 0.2 percent higher at 1,168.00 points, just a few points below a peak of 1,170.29 points hit two weeks ago, a level not seen since early 2011. Britain's FTSE 100, the French CAC and the German DAX closed marginally higher, while the Spanish Ibex and Italy's FTSE MIB ended Wednesday's trading session lower.

The euro zone's blue chip Euro STOXX 50 index fell 0.3 percent to 2,709.83 points, dragged lower by falling shares of financial institutions after lofty gains so far this year.

Societe Generale dropped 3.5 percent, Banco Popolare fell 4.1 percent and Aegon lost 2.2 percent.

Despite the day's losses, the STOXX euro zone banking index is still up 10 percent in 2013, by far the best sector performance.

"The newsflow on the political and macro side is very thin, so there's a bit of hesitation to chase the market higher and we're seeing some rotation between sectors," Saxo Banque senior sales trader Alexandre Baradez said.

"We need some kind of big positive catalyst, better-than-expected Apple results for instance, or good macro data."

U.S. tech major Apple is set to report quarterly results later on Wednesday.

European shares closed flat on Tuesday as Deutsche Bank shares weighed heavily on Germany's DAX Index after rumors that the German financial sector regulator had asked it to simulate a split of its investment banking and retail operations.

European shares closed higher on Monday, managing to hold onto earlier gains as investor sentiment was buoyed by an agreement among U.S. Republicans on Friday to extend the debt ceiling for three months.