Italy was set on Thursday to test fragile investor confidence in the euro zone's ability to heal its debt problems, with a sale of bonds, while weaker Chinese trade data acted as a reminder of broader economic problems.
European shares were flat after recent gains and following data showing China's trade surplus narrowed for a second straight month in September, with both imports and exports lower than expected.
It reflected global economic weakness, which along with the euro zone debt crisis has kept investors avoiding aggressive risk taking over the past months.
In Europe, however, there appeared some traction to the idea that policymakers were working on a cogent plan to solve the debt crisis, or at least reduce its threat.
Jose Manuel Barroso, president of the European Commission, outlined a broad plan on Wednesday to tackle the euro zone's two-year debt crisis, fuelling optimism.
Maybe the political decisions are finally coming through, said Justin Urquhart Stewart, director at Seven Investment Management.
This was to be tested later in the day by a sale of up to 6.5 billion euros in Italian bonds across four separate maturities. Italy is one of the euro zone countries most under stress in the crisis and is seen as too big for the rest of the bloc to bail out.
Of particular interest was the fate of a reopening of 2025 bonds, marking the first sale since mid-July of bonds that fall outside the current scope of the European Central Bank's bond-buying programs.
Yields on Italian 10 year bonds were up ahead of the sales, trading around 5.78 percent.
On stock markets, the FTSEurofirst 300 <.FTEU3> recovered early losses to sit flat to slightly lower still heading for its third straight week of gains, something it has not achieved since March/April.
World stocks as measured by MSCI <.MIWD00000PUS> were up a quarter of a percent.
Earlier, Japan's Nikkei <.N225> rose nearly 1 percent, catching up with U.S. and European gains from Wednesday.
The euro hovered near a one-month high holding gains made the previous day as traders continued to cover short positions in the single currency, which may eke more gains in the near-term even if a sustained rally seems unlikely.
Analysts said the euro may have a little more room to rise as investors clear out bets to sell the currency, which have piled up in past weeks.
But they added that few in the market were keen to take on fresh long positions betting on further gains by the single currency unless euro zone authorities unveil a comprehensive strategy to fight the region's debt crisis at a summit on October 23.
(Additional reporting by Naomi Tajitsu, William James and Brian Gorman; editing by Patrick Graham)