Drugmakers and utilities were among the top gainers as Europe's top share index closed higher on Friday, albeit in choppy trade and light volumes, as uncertain macro economic conditions dampened investors' risk appetite.
The FTSEurofirst 300 was up 2.36 points, or 0.2 percent at 984.97, closing the week higher, having fallen over the last three weeks.
Volumes were just 80 percent of their already weakened 90-day average, reflecting investors' downbeat mood, as the index remained near mid-December lows when asset prices were artificially inflated by central bank intervention.
European equities have been on a downward trend since mid-March when Spain said it was struggling to meet austerity targets and Greece subsequently failed to form a new government after voters rejected austerity measures, raising the prospect of the country leaving the euro zone.
"Market conditions are undeniably difficult at the moment, but this is to be expected given the uncertain economic backdrop that investors are grappling with," said Oliver Wallin, investment director at Octopus Investments, which has some 2.5 billion pounds ($3.92 billion) under management.
Wallin said that until Octopus sees greater clarity and direction it remains neutrally positioned to its long term strategic asset allocation.
Defensive stocks such as utilities, food and beverages and pharmaceuticals helped European stocks higher.
Drugmaker Elan Corporation, up 9 percent, was the top gainer as the euro zone debt crisis weighs on sentiment with investors scrambling for protection in so called safe havens.
Aggreko, the temporary power provider liked for its international exposure, was up 1.8 percent as HSBC upgraded its rating on the firm to "overweight" and raised its 2012 earning forecasts by 14 percent.
There is no light at the end of the tunnel for the euro zone debt crisis, with sentiment surrounding Spain darkening and its leading index at nine-year lows.
The country, which is struggling to meet austerity target and reform its banking sector, was in focus as Catalan President Artur Mas said Spain's wealthiest autonomous region, Catalonia, needed financing help from the central government.
Europe's banks, which have fallen nearly 20 percent in the last three months, were lower again after it was revealed Spain's Bankia would need 15 billion euros in fresh capital, much higher than last week's estimate of 9 billion euros and in addition to last week's capital injection of 4.5 billion euros.
Bankia's shares were suspended, while British lenders Royal Bank of Scotland and Lloyds Banking Group fell up to 4.1 percent.
Basic resource stocks, also down 20 percent in the last 3 months on the back global growth worries, rising costs and falling margins, remain unloved despite trading on a forward 12-month price-to-earnings of just 7.6 times, well below the index 10-year historical average.
"Investors have lost some faith in equities. The low volumes reflect that and until governments act on the euro zone even cheap valuations won't be enough to convince investors to buy riskier assets long-term," said Jimmy Yates, head of equities at CMC Markets.
Greece, which holds fresh elections on June 17, is a big weight on sentiment as many fear the country will have to exit the euro zone, which could cause major disruption to world financial markets and other European economies.
"In the absence of bold policy moves -ECB quantitative easing and/or a greater mutualisation of sovereign, and possibly banking sector, risk -it's likely that financial turbulence would lead to a further, or complete, breakdown of the euro," Credit Suisse said in a note.
The Euro STOXX50 has shed more than 14 percent since February and has fully retraced the LTRO rally that began in mid-December.
Analysts at Societe Generale calculated that an orderly Greek exit could cost the euro zone blue chip index less than 10 percent of its value, but a disorderly Greek exit could cost it almost 50 percent.
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