New trade optimism helped alleviate gloom about predictions for a coming slowdown in the world economy, analysts said.
"We may be facing up to the reality of recession but optimism continues to flow through the veins of investors following comments from the Chinese Commerce Ministry on Thursday," said Craig Erlam, senior market analyst at Oanda trading group.
The easing tensions helped China's yuan strengthen slightly against the dollar, having fallen to an 11-year low earlier in the week.
Key European equity markets were higher at the close, but Milan fell after Italy's anti-establishment Five Star Movement (M5S) warned that its tentative coalition deal with the centre-left Democratic Party could still fall apart.
In the government bond market, the spread between Italy's bond yields and those of rock-solid Germany widened, indicating that investors were demanding a higher risk premium in return for investing in Italian sovereign debt.
Sterling rose against the euro and traded steady against the dollar after heavy Brexit-fuelled losses earlier in the week.
The dollar was about 0.5 percent higher against the euro, showing little reaction to US President Trump lashing out at the Federal Reserve for allowing a strong dollar to make American exports less competitive.
- 'Relatively subdued' -
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US-China trade worries were "relatively subdued" and bond yields stabilised, said analysts at Charles Schwab, but few investors seemed to have the stomach to carry big positions into the long Labor Day weekend.
US stock markets rose at the opening bell, but gains on the DJIA index had mostly fizzled out by the late New York morning, and the Nasdaq and S&P 500 both slipped into the red.
Earlier, Hong Kong started Friday more than one percent higher, but finished with a gain of only 0.1 percent as the arrest of activists fuelled fresh worries about violent protests in the city.
Dealers brushed off data Thursday showing the US economy grew at a slower pace than initially thought in the second quarter. Those figures were mitigated by the fact that consumer spending remained strong.
Elsewhere, oil prices slumped after a three-day surge on positivity surrounding trade talks was coupled with a plunge in US stockpiles that pointed to improving demand.
On the corporate front, shares in Airbus rose after the Euroopean aircraft manufacturer earlier said it had agreed to sell 42 planes to Malaysian low-cost airline AirAsia X in a deal worth $5.0 billion before expected discounts.
The Asian carrier has placed a firm order for 12 long-range A330neo planes and 30 medium-range A321XLR models.
- Key figures around 1540 GMT -
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London - FTSE 100: UP 0.3 percent at 7,207.18 points (close)
Frankfurt - DAX 30: UP 0.9 percent at 11,939.28 (close)
Paris - CAC 40: UP 0.6 percent at 5,480.48 (close)
EURO STOXX 50: UP 0.5 percent at 3,426.76
New York - Dow: UP 0.1 percent at 26,378.71
Tokyo - Nikkei 225: UP 1.2 percent at 20,704.37 (close)
Hong Kong - Hang Seng: UP 0.1 percent at 25,724.73 (close)
Shanghai - Composite: DOWN 0.2 percent at 2,886.24 (close)
Euro/dollar: DOWN at $1.0994 from $1.1057
Dollar/yen: DOWN at 106.25 yen from 106.51 yen
Pound/dollar: UP at $1.2184 from $1.2182 at 2100 GMT
Euro/pound: DOWN at 90.28 pence from 90.76 pence
Brent North Sea crude: DOWN $1.98 at $58.51 per barrel
West Texas Intermediate: DOWN $2.12 at $54.59 per barrel