European markets closed higher Friday ahead of the Christmas break even though a batch of disappointing U.S. economic figures reined in some of the recent optimism over the state of the world's largest economy.
Figures showing that consumer spending and personal income rose by a modest 0.1 percent in November were below market expectations, while the headline 3.8 percent increase in durable goods orders last month masked a decline in a crucial investment measure, benefiting from big orders for Boeing aircraft.
The figures offset some of the optimism in markets about the U.S. economy following a run of largely positive data. Since Thursday, investors have taken heart from figures showing that the number of initial jobless claims in the U.S. unexpectedly fell 4,000 last week to 364,000, the lowest level since April 2008.
Those figures had raised hopes that the U.S. economy got through its soft patch earlier this year and may be poised for stronger-than-anticipated growth in the fourth quarter.
"This doesn't change the overall view too much but it is somewhat deflating," said Jennifer Lee, an analyst at BMO Capital Markets.
That was evident in the markets, where stocks in Europe gave up many of their earlier gains and Wall Street opened lower than predicted in futures markets. Trading activity was muted as the traditional holiday slowdown began in earnest.
In Europe, Germany's DAX closed 0.5 percent higher at 5,878.93 while the CAC-40 in France rose 1 percent to 3,102.09. The FTSE 100 index of leading British shares, which only traded for a half day, closed up 1 percent at 5,512.70.
In the U.S., the Dow Jones industrial average was up 0.6 percent at 12,246 while the broader Standard & Poor's 500 index rose the same rate to 1,262.
Trading was fairly lackluster in the currency markets too, with the euro down 0.1 percent at $1.3048 and the dollar 0.1 percent lower at 78.09 yen.
While the U.S. economy has been the dominant driver in markets the past couple of days, Europe's debt crisis is likely to remain the key market focus next year.
There were reminders Friday of the underlying problems afflicting the 17-nation eurozone.
Figures showed that eurozone banks stashed euro347 billion ($453 billion) overnight with the European Central Bank on Thursday, in another sign that Europe's debt crisis is still putting pressure on the banking system despite massive central bank support. The figure announced Friday is the highest for 2011, topping euro346.4 billion earlier this month.
The large deposits come despite Wednesday's massive central bank credit operation, in which the ECB let banks borrow as much as they wanted for up to 3 years. As a result 523 banks took euro489 billion, the largest ECB loan operation in the 13-year history of the euro.
Earlier in Asia, China's benchmark in Shanghai gained 0.9 percent to 2,204.78 and Hong Kong's Hang Seng rose 1.4 percent to 18,629.17. Japan's financial markets were closed for a public holiday.
Oil prices tracked equities higher _ benchmark crude for February delivery was up 44 cents to $99.97 a barrel in electronic trading on the New York Mercantile Exchange.
Alex Kennedy in Singapore contributed to this report.