European shares extended gains to set a new 22-month high on Friday, after a better-than-expected U.S. jobs data.
The FTSEurofirst 300 Index closed up 0.2 percent at 1,165.21 points, its highest closing level since early 2011.
The U.S. employment picture continued its gradual improvement in December, adding 155,000 positions as the jobless rate held at 7.8 percent.
European indexes initially opened lower after a statement in the notes from the Federal Reserve's December meeting sent ripples through financial markets on Thursday. Treasurys rose as traders speculated about an early end to the Fed's four-year stimulus program — and the threat of higher interest rates ahead.
"You have got a reduction in the tail risks that have been worrying people. Lower risks, combined with a likely upside earnings potential, make us positive on the market," Graham Bishop, senior equity strategist at Exane BNP Paribas, said.
The risks of a U.S. "fiscal cliff", a Chinese hard landing and a breakdown of Europe had diminished following strong actions by the authorities, he said, adding the fourth-quarter earnings season should be slightly better because the macroeconomic situation had been improving.
Latest data showed the vast U.S. services sector grew at its fastest clip in 10 months in December, boosted by a rise in new orders.
European data for the non-manufacturing sector was released on Friday causing markets to climb off their session lows but quickly fall back. Services sector numbers in Spain showed a continued contraction, however the PMI number rose slightly to 44.3 for December from 42.4 the previous month.
For Italy, the figure was up to 45.6 from 44.6 in November, Germany's climbed to 52.0 from 49.7 showing an expansion and French services PMI fell to 45.2 from 45.8. For the euro zone as a whole, services PMI rose to a five month high at 47.7, which still remains a contraction, and composite PMI rose to 47.2 from 46.5 in November.
In the U.K. the figure fell to an unexpected 48.9, which puts the services sector back into contraction. Fears grew that the economy would fall back into negative GDP for the last quarter of 2012 and sterling fell to 1.6038 against the dollar from 1.6058.
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