European Stocks Expected to Follow Wall Street Higher

European shares were set to edge higher on Thursday, after Wall Street reversed early losses following upbeat U.S. data on jobs creation and services sector growth, suggesting a strong recovery in the world's biggest economy.

Sharon Lorimer

European shares fell on Wednesday as a stronger dollar helped to weaken metals prices and halt a rally for miners, but losses were cut as a report showed a dramatic increase in US job creation.

Several European countries celebrate Epiphany on Thursday, with public holidays in Spain, Italy and Austria among others, but financial markets are open.

Portugal paid almost twice as much to sell six-month paper on Wednesday as it did in September, keeping the country at the sharp end of persistent market concerns about euro zone debt. It sold the 500 million euros ($660 million) it had aimed to sell however.

"The true test will come when the peripheral countries enter the bond market," Christoph Rieger, interest rate strategist at Commerzbank told CNBC, adding he thought peripheral sovereign issuance would go smoothly in January. Tension will re-emerge at the end of the first quarter, he said.

Euro zone retail trade for November and the European Union's business climate indicator and economic sentiment indicator are among economic data to be released in Europe on Thursday.

In addition, the Bank of England will publish its survey on credit conditions for the fourth quarter and mortgage lender Halifax publishes house price figures for December.

Germany is set to release data on manufacturing orders for November.

In Britain, members of parliament will report on the implications of the Gulf of Mexico oil spillfor UK drilling. Former BP Chief Executive Tony Hayward was among the witnesses who were heard.