EUROPE MARKETS: European Stocks Rise, Led By Next, Portugal Telecom

By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) -- European stocks ended higher on Friday after the previous session's selloff, with retailer Next PLC leading gainers on the Stoxx 600 index after it raised its profit forecast.

The Stoxx Europe 600 index rose 0.6% to end at 327.64 on Friday, leaving it nearly unchanged for the week.

The index fell 0.7% on Thursday as investors returned from the New Year's break and got into a selling mood, partly using disappointing Chinese data as an excuse.

Shares of Stoxx 600 heavyweight HSBC Holdings PLC (HSBC) fell 0.5% in London. HSBC also fell overnight in Asia as it's a major component of the Hang Seng Index , which fell 1.8% after data revealed slowing activity in China's services sector in December. The U.K.'s FTSE 100 index rose 0.2% to 6,730.67.

On Thursday, data showed weaker-than-expected Chinese manufacturing activity, which left investors fretting in Europe and across the globe. However, analysts said markets remain thin after the holidays and many traders were concerned about a pullback in the new year.

"Speaking to clients, the general feeling is that after the first trading of the year retreat, European markets are reversing some of that weakness, which was driven by profit-taking rather than fundamentals," wrote Ishaq Siddiqi, market strategist at ETX Capital, in emailed comments.

"China data hasn't helped, but the feeling in markets regarding the U.K., euro zone and U.S. economy is relatively sanguine," he said.

Next PLC was the top riser in the Stoxx 600, jumping 10% in London trade after the clothing retailer raised its full-year pretax profit forecast and announced a special dividend of 50 pence per share. Next said strong online deliveries lifted sales during the Christmas period.

Earlier this week, Debenhams PLC , a U.K. department-store chain, issued a profit warning due to heavy promotional activity by competitors in the run-up to the holidays. But shares of Debenhams rose nearly 4% on Friday.

Portugal Telecom was also one of the top gainers in the Stoxx 600, rallying 9.1%.

Also supporting the Stoxx 600 was a 1.4% gain for drug maker Sanofi SA (SNY), which helped lift the French CAC 40 index by 0.5% to 4,247.65.

The German DAX 30 index rose 0.4% to 9,435.15.