By Sara Sjolin
LONDON--European stocks closed the week 1.7% lower with banking shares under pressure Friday, as upbeat Chinese economic data failed to spur investor optimism amid worries over the euro-zone debt crisis.
The Stoxx Europe 600 index gave up 0.1% to close at 270.27, leaving the benchmark in negative territory for a third straight day.
"Markets were looking forward to Monday's meeting of euro-zone finance ministers to get an agreement on the pending aid payment for Greece and if the current bailout could be extended. This week it has become quite clear that we won't get a decision next week," said Norbert Aul, European rates strategist at RBC Capital Markets.
He also pointed to worries over Spain, as the country so far has refrained from putting in an official aid request to trigger bond purchases from the European Central Bank's Outright Monetary Transactions program.
"It would have been a positive sign if the entire deal including aid request, finalization of conditionality and parliamentary ratification could have been done before the end of the year. But with this time horizon it looks like it won't be doable anymore," he said.
Shares of Novo Nordisk AS jumped 7.3%, after a U.S. panel advising the Food and Drug Administration voted to approve two insulin products and recommended a study to assess the possible risk of the drugs causing heart attacks.
However, shares of Credit Agricole SA slumped 5.9%, as the French bank reported a wider-than-expected loss for the third quarter.
In China, a raft of data showed encouraging trends. Industrial output and retail sales rose by 9.6% and 14.5%, respectively, in October, with both growth readings topping analysts' expectations.
The data, however, failed to improve the mood in Europe as growth worries and nervousness over Greece set Friday's agenda.
A monthly report from the Bank of France said economic activity in the euro-zone's No. 2 economy is expected to decline by 0.1% in the fourth quarter, which would place France in recession.
Earlier this week, worries over Germany's economic performance also spooked investors as European Central Bank President Mario Draghi said the euro-zone debt crisis is beginning to have an impact on the region's powerhouse.
Developments in Greece's effort to secure its next tranche of bailout money garnered attention ahead of a Monday meeting of euro-zone finance ministers. The ministers may delay a decision to pay out the next bailout installment until late November, news reports said.
Greece's parliament is scheduled to vote Sunday on its 2013 budget, after having narrowly approved 13.5 billion euros ($17.16 billion) in austerity measures earlier this week. The Athens General Index added 0.9% to 801.99. The index fell less than 0.1% on the week.
After the markets close in Europe, attention shifts to the U.S., where President Barack Obama is due to make his first public comments since his re-election on Tuesday. Investors will likely scrutinize his words for any clues on his next move to tackle Washington's so-called fiscal cliff--billions in automatic tax hikes and spending cuts that would take effect in 2013.
"The negotiations are going to be tough and the election result is unlikely to ease tensions between the Republicans and the Democrats in the Congress," analysts at Danske Bank said in a note. "We still expect that we will get very close to the December deadline before a deal is eventually struck. We thus expect U.S. politics to be a negative factor for risk sentiment in coming months," they said.
U.S. stocks opened lower, but Wall Street quickly reversed course as the preliminary reading of the University of Michigan/Thomson Reuters consumer-sentiment index rose to 84.9 in November--the highest since July 2007.
Among Friday's other notable movers in Europe, shares of International Consolidated Airlines Group SA rose 1.6%. The firm said it would cut 4,500 jobs at its loss-making Iberia airline, after posting a 24% drop in third-quarter profit.
Shares of Rolls-Royce Holdings PLC gained 1.9%. The power-systems firm said that its current trading is consistent with management's earlier forecast and that it sees good growth in full-year underlying revenue and underlying profit.
The FTSE 100 index fell 0.1% to 5,769.68, with shares of HSBC Holdings PLC moving down 0.3%. On the week the index saw a 1.7% drop.
In Germany, declines in banking shares hit the DAX 30 index, which dropped 0.6% to 7,163.50 and lost 2.7% on the week.
Shares of Commerzbank AG gave up 6.3% as Deutsche Bank AG shed 2.3%.
Outside the main index in Frankfurt, shares of Rheinmetall AG retreated 5.7%, as it cut its 2012 outlook after reporting a drop in third-quarter profit.
Among French stocks, shares in Vallourec SA gained 3.7%, after UBS lifted the steel-tube maker to neutral from sell.
The CAC 40 index rose 0.5% to close at 3,423.57, but slumped 2% on the week.
Outside the main indexes, shares in Aegon NV dropped 3.5%, after Bank of America Merrill Lynch cut its rating on the insurance firm to neutral from buy.
Write to Sara Sjolin at AskNewswires@dowjones.com