Pharmas Lead Europe Shares Higher, Banks Recover

Across Europe, the FTSE 100 and Germany`s DAX were both 0.4 percent lower and France`s CAC 40 was down 0.6 percent.

European shares recovered on Friday, led by pharma stocks as Roche lowered its takeover bid for Genentech, but also ahead of economic data from the United States and Europe which is expected to be bleak.

At 1003 GMT, the FTSEurofirst 300 index of top European shares was up 0.4 percent at 799.61 points, after having been down as much as 0.6 percent earlier.

Swiss drugmaker Roche Holding AG rose 1.7 percent after it launched a hostile bid for Genentech, and cut its offer for the 44 percent of the U.S. biotechnology company it does not already own.

Banks also recovered from Thursday's losses as strategists pointed to positive sentiment returning to the sector.

"Investors seem to acknowledge efforts to increase visibility and transparency in the banking sector," said Henk Potts, strategist at Barclays Stockbrokers.

"Positive news flow from the banking sector also helps in today's markets," he said.

Barclays was the top gainer, up 6.3 percent. In Davos on Friday, Chairman Marcus Agius said he sees the package of measures announced by the British government last week as positive.

Royal Bank of Scotland and Deutsche Bank were up between 5.7 percent and 3.2 percent, respectively while the DJ Stoxx banks index was up 1.2 percent.

Across Europe, the FTSE 100 and Germany's DAX were both 0.4 percent lower and France's CAC 40 was down 0.6 percent.

BRACED FOR HORRENDOUS FIGURES

"However, what we are seeing today is a nervous trading session and the market is braced for a set of pretty horrendous numbers from the United States later today," Winder said.

U.S. GDP figures for the fourth quarter, due at 1330 GMT, are expected to show a contraction of 5.4 percent in the fourth quarter.

Data showed that euro zone unemployment rose to 8.0 percent, above the Reuters poll of 7.9 percent..

Joerg Rahn, senior economist at MM Warburg, also pointed to negative macroeconomic news flow from Japan, where production fell a record 9.6 percent in December.

France Telecom dropped 1.9 percent after JP Morgan cut its price target to 19.70 euros from 20.40 euros, with an "underweight" rating on the stock.

Chemicals were the top declining sector, with the DJ Stoxx chemicals index down 0.4 percent.

BASF fell 1.7 percent, after Morgan Stanley lowered its price target in the stock to 30 euros from 40 euros.