Stock indices traded higher as yesterday's comments by the European Central Bank (ECB) President Mario Draghi continued to support the markets. He hinted at a press conference on Thursday that the central bank may add further stimulus measures at its meeting in March as downside risks rose.

The European Central Bank (ECB) President Mario Draghi said at the World Economic Forum in Davos on Friday that the central bank has "plenty of instruments" to boost inflation in the Eurozone.

Meanwhile, the economic data from the Eurozone was mostly weaker than expected. Markit Economics released its preliminary manufacturing purchasing managers' index (PMI) for the Eurozone on Friday. Eurozone's preliminary manufacturing PMI declined to 52.3 in January from 53.2 in December. Analysts had expected the index to fall to 53.0.

The decline was driven by a slower pace of expansion in business activity.

Eurozone's preliminary services PMI fell to 53.6 in January from 54.2 in December. Analysts had expected the index to remain unchanged at 54.2.

"The cooling in the pace of growth in euro area business activity at the start of 2016 is a disappointment but not surprising given the uncertainty caused by the financial market volatility seen so far this year", Markit's Chief Economist Chris Williamson said.

He noted that data was signalling the Eurozone's economy could expand 0.3% - 0.4% in the first quarter.

The European Central Bank (ECB) released its Survey of Professional Forecasters (SPF) for Q1 2016 on Friday. Forecasters cut their inflation forecasts. Eurozone's inflation is expected to be 0.7% in 2016, down from October estimate of 1.0%, 1.4% in 2017, down from October estimate of 1.5%, and 1.6% in 2018.

Long-term inflation forecasts (for 2020) was lowered to 1.8% from 1.9%.

SPF respondents said in its survey that the downgrade was driven by oil price developments.

The Office for National Statistics released its retail sales data for the U.K. on Friday. Retail sales in the U.K. dropped 1.0% in December, missing expectations for a 0.3% decline, after a 1.3% rise in November. November's figure was revised down from a 1.7% increase.

The decline was driven by lower demand for clothing due to warm weather. Sales of clothing and footwear slid 6.3% in December.

On a yearly basis, retail sales in the U.K. jumped 2.6% in December, missing forecasts of 4.3% increase, after a 4.5% rise in November. November's figure was revised down from a 5.0% gain.

Indexes on the close:

Name Price Change Change %

FTSE 100 5,900.01 +126.22 +2.19 %

DAX 9,764.88 +190.72 +1.99 %

CAC 40 4,336.69 +130.29 +3.10 %