European stocks closed the week higher but off a mid-session rally after the U.S. government reported a better-than-expected rise in jobs for September.
Shares pared earlier gains after U.S. brokerage Merrill Lynch warned it would post a loss in the third quarter because of the credit markets crisis, but rebounded later.
The London FTSE-100, Paris CAC-40 and Frankfurt DAX closed higher but off the session's highs earlier in the day. The FTSE CNBC Global 300 was firmly higher.
U.S. stocks traded higher on the release of the better-than-expected employment data.
Merrill Lynch said challenging credit market conditions will result in a third-quarter loss of as much as 50 cents a share.
The loss is the result negative mark-to-market adjustments to its positions in collateralized debt obligations and subprime mortgages.
Barclays Gives Up ABN Amro
Meanwhile, Barclays abandoned its bid for ABN Amro, leaving the way clear for the Royal Bank of Scotland-led consortium to proceed with its $99.4 billion cash-and-stock bid.
Barclays shares closed 0.7% higher, RBS were 0.8% up, Fortis shares gained 3.4% and Santander stock rose 0.9%.
Economists said Barclays would pursue other targets once the liquidity squeeze in the financial markets eases, possibly focusing on the emerging markets.
"I think they've got bigger fish to fry out in the Far East," David Buik from BGC Partners told "European Closing Bell."
The banking sector overall seemed to shrug off reports that banking supervision officials think the worst of the credit crisis is not over and rose strongly.
In the airline sector, U.K. budget airline easyJet raised its full-year guidance for pretax profit on the bank of a one-time gain from its investment in The Airline Group. Its shares soared 4%.
Shares in Alcatel-Lucent closed nearly 1% down after the Financial Times said it could lose some AT&T business to Ericsson.
And the role of the French state fell under the spotlight in the EADS share trading scandal as politicians questioned why state bank Caisse des Depots had been ordered to buy shares shortly before their value fell.
European Central Bank President Jean-Claude Trichet will testify to the European Parliament's Committee on Economic and Monetary Affairs on Tuesday and investors are keen to see whether he will give more hints on the future direction of rates, after he left his options open on Thursday.