European shares were up 0.7 percent around midday on Friday, adding to the previous session's sharp rebound as robust macro data from China spurred gains in resource-related stocks such as BHP Billiton.
But investors remained cautious ahead of key U.S. monthly retail sales data, due at 1330 GMT, that could shed more light on the expected timing of the Federal Reserve's exit strategy.
ING surged 4.7 percent after the Dutch bancassurer said it will repay 5 billion euros in state support on Dec. 21, confirming its announced plans and fuelling speculation it may secure better terms on the remainder of its government aid.
At 1152 GMT, the FTSEurofirst 300 index of top European shares was up 0.7 percent at 1,011.81 points. The index, which is up 22 percent so far this year, is on track to record a loss of 1.4 percent on the week.
"Equities are in a sweet spot and this could last for a few months, with economic growth returning while central banks remain very cautious," said Jean-Marie Mercadal, chief investment officer of OFI Asset Management in Paris.
"There has been a bit of hesitation since September, but the environment remains positive for stocks, which will also be supported by strong inflows in the asset class, as well as the return of mergers and acquisitions."
Miners and steelmakers gained ground, with BHP Billiton gaining 2.4 percent, Rio Tinto adding 2.1 percent and ArcelorMittal climbing 0.7 percent.
Data showed on Friday that Chinese industrial output soared in November at its fastest pace since June 2007, highlighting the economy's strong recovery from the global downturn.
Energy shares also gained ground, climbing along with crude oil futures. Total, BP, and Repsol were up 0.7-0.8 percent.
Shares of major European bank stocks, hurt earlier in the week by fears over public finances of Greece and Spain, inched higher on Friday, with Credit Suisse up 0.8 percent, BNP Paribas up 0.5 percent and Intesa SanPaolo up 0.9 percent.
But Spanish and Greek banks remained under pressure, with Banco Santander down 0.9 percent, BBVA down 0.5 percent, Piraeus Bank down 3.6 percent and National Bank of Greece down 1 percent.
Around Europe, UK's FTSE 100 index was up 0.8 percent, Germany's DAX index up 1 percent, and France's CAC 40 up 0.5 percent.
AXA fell 1.3 percent. Sources told Reuters the French insurer has put the auction of its 15.6 percent stake in China's Taikang Life on hold on growing concerns that some potential buyers may be restricted under rules proposed by the insurance regulator.
Irish budget airline Ryanair added 2.9 percent, buoyed by a rating upgrade to "outperform" from "in-line" by Cazenove.
Thales surged 6.6 percent after Europe's biggest defence electronics firm unveiled a five-year plan to cut overhead costs by increasing the efficiency of its software, engineering, supply chain and industrialisation operations.
Signaling a rise in investors's appetite for risky assets, The VDAX-NEW volatility index was down 4.9 percent on Friday, adding to the previous session's sharp drop.
The lower the volatility index, which is based on sell- and buy-options on Frankfurt's top-30 stocks, the higher is investors' appetite for risky assets such as equities.
