European equities climbed to levels not seen since last summer on Friday, with charts pointing to more near-term gains as long as earnings and global economic data remain supportive.

The pan-European FTSE Eurofirst 300 index rose to 1,107.13, its strongest since July, before trimming gains slightly 1,106.69, up 0.4 percent at 1132 GMT. The index has gained 2.5 percent this week.

The narrower Euro STOXX 50 index of euro zone blue chips climbed to 2,605.80, its strongest since August. There was strong activity in both directions around the 2,600 mark - a level of high open interest in March options - as investors wrong-footed by the rally sought to cover positions while those who had bet on the gains scrambled to increase the chances of a win ahead of the 1100 GMT contract expiry.

Very short-term players are short equities, short indexes, and they are getting squeezed, Zeg Choudhry, head of equities trading at Northland Capital Partners, said.

Underneath the market is very well supported, the de-risking is over and  I think the market is probably ready to have a move to the upside.

Credit Suisse raised its target for Euro STOXX 50 to 2,750 from 2,650, implying an upside of a further 6 percent by year-end. Implied volatility on the index, a crude gauge of risk aversion, fell to 11-month lows

UBS also turned slightly more optimistic on Europe, its economists reducing the size of expected euro zone GDP contraction this year to 0.4 percent from 0.7 percent.

Given our GDP tweak and slightly higher forecast EPS for the U.S., European earnings may end 2012 closer to flat, said UBS analysts, who currently forecast a 5 percent fall in European earnings per share.

A run of stronger U.S. data has played a key part in supporting risk appetite at a time of recession in Europe, so equities will also be paying close attention to U.S. February industrial numbers at 1315 GMT and the March University of Michigan sentiment index at 1355 GMT.

The higher the exposure to U.S. and emerging markets, the higher the probability to outperform (for equities), Andreas Huerkamp, equity strategist at Commerzbank in Frankfurt, said, adding that for the Euro STOXX 50 such exposure was lower than for some other indexes, such as Germany's DAX.

The DAX added 0.6 percent. The indices of southern European countries, which mix a higher proportion of domestic-focused companies with risks linked to large levels of sovereign debt, underperformed. Spain fell 0.2 percent, Portugal was down 0.1 percent and Greece 0.8 percent.

Norwegian oilfield engineering group Subsea 7 was the top FTSE Eurofirst gainer, up 5.6 percent after announcing a record backlog on Friday as it surprised investors with share buyback plans and a special dividend.

European autos index, meanwhile, fell 0.5 percent. Bernstein downgraded the sector to 'neutral' and citing, among other reasons, weaker than expected domestic demand.