European Stocks Advance on German Data

European stocks closed in positive territory for a third straight day after upbeat German business data and encouraging comments from European Central Bank President Mario Draghi.

The Stoxx Europe 600 index gained 0.3%, to 289.72, closing at its highest level since February 2011. On the week, the benchmark rose 0.9%. Germany's DAX index closed at its highest level in five years.

"We have seen the market most of this week move up off the lows as buying has been heavier on the dips. The bullish nature of the market in Europe and U.S. shows that confidence is returning and with the shrugging off of poor data many investors are quick to change bias and this leads to more volatile swings," said Atif Latif, director of trading at Guardian Stockbrokers.

"Notwithstanding all the positive themes, we do however remain cautious over the medium term and do expect some catalysts to come into play that would merit a healthy correction," he said.

Nokia posted one of the biggest losses in the Stoxx Europe 600, down 6.6% in Helsinki, adding to a 5.5% loss on Thursday on the back of a mixed earnings report. UBS cut the Finnish handset maker's price target to �2.80 from �3.

STMicroelectronics gained 4.3% in Paris, after Exane BNP Paribas lifted the chip maker to "outperform" from "neutral."

Easyjet jumped 5.2% in London. UBS lifted the no-frills airlines to "buy" from "neutral" following strong first-quarter results reported on Thursday.

The ECB's Mr. Draghi, speaking at the World Economic Forum in Davos, Switzerland, said economic activity was stabilizing. He also said he foresees a recovery in the second half.

Separately, the ECB said banks that participated in long-term refinancing operations will repay next week �137.2 billion of the more than �1 trillion in loans provided in December 2011 and February 2012.

In the U.S., the Standard & Poor's 500-stock index looked to cap its longest streak of daily gains since 2004, as better-than-expected earnings from Procter & Gamble and Microsoft offset a disappointing new-home sales report.

In Asia, Japan's Nikkei Stock Average soared 2.9% to its highest level since April 2010, as a drop in the yen boosted exporter shares. The Nikkei edged up 0.1% on the week, its 11th consecutive weekly gain, the longest such streak since 1986.

Investors also focused on the latest data from Germany. The Ifo Institute's January business-climate index took an unexpectedly strong jump in December, signaling that a widely suspected contraction in the fourth quarter may have come to an end.

Germany's DAX index rallied 1.4%, to 7857.97, its highest close since January 2008. On the week, the index gained 2%. Deutsche Bank rose 0.9%.

In the U.K., the Office for National Statistics said the U.K. economy contracted 0.3% in the fourth quarter, a sharper-than-expected decline.

"It is now open season for speculation over a triple-dip recession. In other words, markets will be scrutinizing [first-quarter] data for signs of another contraction," said Philip Shaw, chief economist at Investec Securities, in a note.

In London, the FTSE 100 index gained 0.3%, to 6284.45, and advanced 2.1% on the week.

Royal Dutch Shell rose 1.3%, after Soci�t� G�n�rale lifted its rating on the oil company to "buy" from "hold."

France's CAC-40 index rose 0.7%, to 3778.16, its highest level since July 2011. It rose 1% on the week.

Cr�dit Agricole picked up 2.3%. The bank said it would take a hit of about �160 million due to a �651 million impairment charge at the regional-bank level, but it wouldn't affect its consolidated results or solvency ratios.