European share price edged up on Friday, bolstered by companies with exposure to faster-growing foreign markets that are better protected from the bloc's economic and debt woes.
But with Europe's battered consumers facing a fresh shock from rising oil prices, Greece's debt troubles far from over and equities up strongly since the start of the year, investor caution kept volume thin and prevented the market returning to Monday's seven-month peaks.
The FTSE Eurofirst 300 <.FTEU3> closed up 0.2 percent on the day at 1,077.18 points, making up only some of its earlier weakness to finish 0.5 percent lower for the week in its second-worst showing for two months.
The index, which has added 7 percent this year, started showing signs of stalling after setting an intraday seven-month high of 1,091.81 on Monday.
It is a case of running out of steam: there has been a lack of volume over the last few days and the buying is starting to dry up a little bit after the strong run we've had, Andy Ash, head of sales at Monument Securities, said. You could easily go down 5-10 percent from here.
Volume on the FTSE Eurofirst 300 for the week was the lowest since the holiday-shortened first week of January.
Low turnover has generally characterised the latest rally, with many investors staying on the sidelines in Europe in particular, concerned by weak economic growth and the indebtedness of some euro zone countries.
As a key consumer of Middle Eastern oil, Europe is also likely to be more affected by the spike in crude prices fuelled by cuts in Iranian supply
Brent crude has risen 12 percent since the start of February, on track for its biggest monthly jump in more than three years and threatening consumers with higher petrol and heating bills.
It will impinge on the retail sector, and in the auto sector it has already started to take some of the steam out of the market, Monument's Ash said.
Asset returns in 2012: http://link.reuters.com/nyw85s
Euro zone debt crisis in graphics: http://r.reuters.com/hyb65p
Portugal, Italy and Ireland bond spreads: http://link.reuters.com/mac36s
Concerned about the domestic woes in Europe, investors have tended to prefer companies with international exposure, especially to faster-growing emerging markets.
This paid off on Friday, when strong performance in Brazil helped Telecom Italia
Together with plans to reduce its debt, this helped boost the operator's shares nearly 7 percent, making them the top riser on the FTSE Eurofirst 300.
On an index basis, Austria, the most exposed country to emerging markets in Western Europe, outperformed, with its benchmark index adding 1.6 percent on the day <.ATX>.
Frankfurt's DAX <.GDAXI> also did well, adding 0.8 percent as investors continued to welcome Germany's relative economic strength and strong exports.
Providing the global macro picture remains supportive, the DAX is an obvious beneficiary given it is export-orientated, James Buckley, fund manager at Baring Asset Management, which looks after some 30 billion pounds ($48 billion), said.
His portfolio is tailored to withstand the rise in energy prices and weakness in domestic Europe, with holdings of oil service firms and a dislike for retailers and consumer staple.
Such a cautious stance on the continent was reflected in the weekly EPFR flows data, which showed investors piling in to emerging market equities with the most vigour.
Flows into Europe equity funds did turn positive as the week and the Greek bailout deal progressed, EPFR said.
But the bulk of money that investors committed went to fund groups dedicated to the biggest non-euro zone markets, with Switzerland equity funds recording their biggest weekly inflow since early September and UK equity funds absorbing fresh money for the sixth time in the eight weeks year-to-date.
(Reporting By Toni Vorobyova; Editing by David Hulmes)