European shares rose for the fourth straight day yesterdayday, led by UK bank HBOS and French retailer Carrefour, while Finnish mobile phone maker Nokia was the biggest blue-chip loser.
But economic data was mixed on both sides of the Atlantic and equity strategists saw scant scope for stock markets to rally.
"We still see no clear trigger for a sustained recovery," UniCredit's Gerhard Schwarz said, citing the ongoing credit crisis, inflationary pressures and downward revisions to corporate earnings estimates.
"We expect more negative news from the financial industry and on the economic outlook front in coming weeks and months and that is not going to calm the nerves of investors," said Heinz-Gerd Sonnenschein, equity strategist at Postbank.
LandesBank Berlin said fundamentals and chart-technical signals pointed to continued volatility in eurozone stock markets, making possible a test of year-lows hit in mid-July.
On Friday the FTSEurofirst 300 index of top European shares closed 0.3 per cent higher at 1,194.73 points. The index advanced 1.2 per cent for the month, August marking only its second month of gains in the last 10.
It is down 21 per cent this year, hurt by bank write-downs, a slowing economy and uncertainty over interest rates.
Mortgage lender HBOS led Friday's rise, putting on 3.4 per cent amid market talk it was about to sell its Australian operation, traders said. HBOS declined to comment.
Dutch-Belgian financial group Fortis rose 2.8 per cent and Royal Bank of Scotland added 2.1 per cent.
Carrefour shot up 7.2 per cent after the French group met key profit expectations for the first half and stood by its 2008 forecasts. The DJ Stoxx European retail index climbed 1.5 per cent.
Nokia fell 2.2 per cent, with traders citing an upcoming change in a key MSCI index, which is likely to trigger selling, and gloomy comments from rival Samsung.
Global equities rose sharply on Thursday after news that the US economy grew more than expected in the second quarter.
Data yesterday showed business activity in the US Midwest expanding at a far more robust rate than expected in August, and US consumer confidence rising to a five-month high.
But US personal income tumbled unexpectedly in July, registering its sharpest decline since a August 2005 - and spending slowed as the effects of a government stimulus wore off.
In the eurozone inflation slowed more than expected in August but economic sentiment worsened more than forecast, underlining concerns the area may be heading for a recession.
"Economic growth in the euro zone should suffer not only in the coming months but also far into 2009," Raiffeisen Bank said.
"The problems in the financial sector are far from over and a rapid recovery isn't in sight," the Austrian bank said, adding: "Earnings expectations should further come down in the course of the year and weigh on European stock markets."
Dutch bank ING, in an equity strategy note on European second-quarter corporate earnings, said: "The overall theme is still 'bad, but could have been worse'."