European stocks make modest gains

London's benchmark FTSE 100 index climbed 0.16 percent to 5,854.89 points, while in Frankfurt the DAX 30 added 0.21 percent to 6,995.62 points and in Paris the CAC 40 edged up 0.11 percent to 3,476.18 points.

The euro firmed to $1.3263 from $1.3196 in New York late on Thursday.

"In the absence of major news investors are navigating on a very short term basis," said Renaud Murail at Barclays Bourse in Paris.

"They are taking their profits at the least sign of bad news then go and buy in certain sectors that are still undervalued," he added.

Over the past week, London shares fell by 1.9 percent, Frankfurt by 2.3 percent and Paris by 3.3 percent, ending a recent rally.

"The tide turned for equities this week as investor's risk appetite waned," said Rebecca O'Keeffe, head of investment at brokers Interactive Investor.

"A potential slowdown in global manufacturing and fears for Chinese growth affected markets worldwide, with Asia having their worst week of the year."

European stocks had profited in recent weeks following the continent's success in helping Greece avoid a messy default.

But sentiment has turned sour as data showed manufacturing activity in China, the world's number two economy, hit a four-month low, while separate figures indicated that the eurozone was in recession.

"Weakening global growth has become the new concern for the market," the Hightower Report said.

"The six month equity rally has been built on lower than normal volumes, so investors are worried that the foundations are not as strong as they might be," said O'Keeffe.

"And with some markets reaching four-year highs, it is not a surprise that some money is being taken off the table," she added.

US stocks were mixed in afternoon trading despite the Commerce Department releasing data showing new-home sales fell for the second month straight in February.

The Dow Jones Industrial Average added 0.24 percent to 13,076.83 points and the broad-market S&P 500 rose 0.25 percent to 1,396.23 points.

The tech-rich Nasdaq Composite dipped 0.16 percent to 3,058.53 points.

Asian stock markets mostly closed lower.

Tokyo fell 1.14 percent, Sydney finished flat, Hong Kong slipped 1.11 percent, and Shanghai lost 1.10 percent.

European bond yields fell, with the rate of return for investors on benchmark 10-year German Bunds falling to 1.869 percent from 1.910 percent on Thursday.

The yield on 10-year French bonds dipped to 2.950 percent from 2.985 percent after the national statistics agency said the country should escape a recession and the government bumped up its 2012 growth forecast to 0.7 percent.

Italian 10-year bond yields slid to 5,057 percent from 5.082 percent and Spanish yields dropped to 5.350 percent from 5.473 percent.