Europe's main stock markets moved lower for the most part as traders weighed upbeat Chinese data against gloomy Japanese industrial sentiment, ongoing US fiscal cliff worries, and modest results from the EU's final summit of the year.
In afternoon deals, Frankfurt's benchmark DAX 30 index of leading shares added 0.09 percent to 7,588.48 points, while the Paris CAC 40 shed 0.23 percent to 3,634.71 points.
London's FTSE 100 index fell 0.14 percent to 5,921.22 points, one day after Standard and Poor's cut the outlook on Britain's AAA credit rating from stable to negative, sparking concern over the potential loss of the top-level assessment.
The European single currency edged up to $1.3076, up from $1.3073 late in New York on Thursday. Gold prices rose to $1,696.50 an ounce on the London Bullion Market, from $1,692.75.
"Stocks opened slightly better this morning but soon adopted the familiar sideways trading pattern that has characterised this week, as stronger than expected Chinese manufacturing data was weighed against continuing fiscal cliff uncertainty," said CMC Markets analyst Michael Hewson.
"Many of the morning headlines concern S&P cutting their outlook for the UK to negative, though in reality the move has had limited impact, with Fitch and Moody's having announced similar views already and the market fully aware of the difficult economic climate."
Europe's leaders gathered in Brussels on Friday for their seventh and final summit of a crisis-hit year, trumpeting deals to save Greece and monitor banks but delaying ambitious proposals for further EU integration.
But leaders dampened hopes of a swift deal to radically overhaul the eurozone, leaving plans for the future in the long grass of 2014 and beyond.
"The EU summit in Brussels seems to be less important and is likely to fade in the background as no major decisions will be taken (as far as) the euro and the eurozone are concerned at this meeting," said ETX Capital trader Markus Huber.
Market sentiment was partly boosted by solid data from Asian powerhouse China.
HSBC said China's manufacturing activity hit a 14-month high this month in another sign that the world's number two economy was picking up steam.
The bank's preliminary purchasing managers' index (PMI) reached 50.9, up from a final 50.5 in November when the figure returned to growth after 12 consecutive months of contraction.
A reading above 50 shows expansion while one below signals contraction. The December reading is the highest since October last year.
"Very uplifting news from China, where the flash PMI hit 14-month high indicating green shoots of recovery continue to grow, inspiring stocks in Europe overshadowing lack of progress on fiscal cliff in America," said Gekko Global Markets trader Anita Paluch.
However, markets remain nervous that US lawmakers seem to be making slow progress on an agreement to avert the fiscal cliff -- $600 billion in spending cuts and tax hikes slated to come into effect on January 1 which could send the economy into recession.
President Barack Obama and Republican House Speaker John Boehner held what were described as "frank" talks Thursday. But there was little sign they had found common ground on a more bearable plan to cut the country's huge deficit.
US stocks fell in early trade Friday amid worries about Washington's budget impasse, with a sharp drop in Apple weighing on the Nasdaq.
After a half hour of trade, the Dow Jones Industrial Average was down 0.06 percent to 13,162.39 points.
The broad-market S&P 500 shed 0.28 percent to 1,415.47 points, while the tech-rich Nasdaq Composite slid 0.50 percent to 2,977.21 points.
Heavyweight Apple was down 2.9 percent. A federal jury on Thursday found Apple guilty of infringing on smartphone call handling and camera patents held by a licensing firm in which rivals Sony and Nokia hold stakes.
Asian markets traded mixed, with strong Chinese manufacturing figures offset by confidence among Japanese manufacturers hit a near three-year low in the final months of 2012, adding to concerns about the already weak economy.
Hong Kong gained 0.71 percent and Shanghai surged 4.32 percent after the upbeat Chinese data.
Tokyo stocks meanwhile closed flat, and currency traders continued to sell the yen on the last working day before Japan holds a general election on Sunday that is expected to see the ruling party ousted.