Limbo over ECB bond buy action dominates sentiment

The FTSEurofirst 300 index of top European shares was down 0.35 percent at 1,097 points, but still near levels last seen in March after the European Central Bank had pumped over a trillion euros of cash into the banking system.

Europe's stock markets began their latest rally two weeks ago when ECB President Mario Draghi said the central bank was "ready to do whatever it takes to preserve the euro", raising hopes of bold steps to help lower the borrowing costs of Spain and Italy.

The drop in European shares was complemented by greater demand for German government bonds – traditionally favoured by risk-averse investors. Bund futures were up 53 ticks at 143.09 from Thursday's settlement.

"There's been a bit of risk-off … and we're following U.S. Treasuries higher, but agenda-wise things are quiet. We could go sideways till we get into September. There's no supply next week that might give us some support," a trader said.

The euro – the key barometer of faith in the euro zone's ability to overcome its debt probems – was down at $1.228, 1.3 percent off its peak of the week.

Commodity markets took their cue from the Chinese data and the prospects of further central bank action.