European shares notched up a fifth straight week of gains, as the outlook for the global economy improved and on optimism Greece would avoid a messy default, though Novartis led a slight reversal on Friday amid doubts about a key drug.

The pan-European FTSEurofirst 300 <.FTEU3> index of top shares fell 0.3 percent to a provisional close of 1,043.41 points. Over the week, the index rose 2.5 percent, its fifth straight week of gains.

Economic data has boosted investor confidence in the early part of 2012.

Some key cyclical indicators have turned, and the German ZEW this week was very very strong, said Daniel McCormack, strategist at Macquarie.

That has surprised the market. This rally still has a way to run, as some investors haven't bought back in yet.

Greece was closing in on an initial deal with private bond holders on Friday that would prevent it from tumbling into a chaotic default but lose investors up to 70 percent of the loans they have given to Athens.

Novartis fell 4 percent after the European Medicines Agency advised doctors to continuously monitor patients for six hours after giving them a first dose of the company's multiple sclerosis drug Gilenya, casting a shadow over the potential blockbuster product.

(Reporting by Brian Gorman)