By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- European stock markets climbed in afternoon action on Friday, after U.S. nonfarm payrolls data beat expectations, leaving investors questioning if the data would be enough to trigger the Federal Reserve to scale back asset purchases.

The Stoxx Europe 600 index gained 0.4% to 292.89, after closing down 1.2% on Thursday.

The index had struggled for direction for most of the early session, but was sent higher after U.S. nonfarm payrolls data showed 175,000 jobs were added to the economy in May. The unemployment rate, however, ticked higher to 7.6% from 7.5%. Economists surveyed by MarketWatch expected an increase of 164,000 jobs in May and a jobless rate of 7.5%.

Ahead of the data, investors worried that a strong labor report could push the Fed closer to scaling back its aggressive asset-purchases program. Fed Chairman Ben Bernanke said last month that a tapering could begin in coming months if data continue to improve, fueling worries the $85-billion-a-month liquidity injection into the market will soon come to an end.

"As the labor market often lags behind changes in output, the case for scaling-back policy stimulus is by no means clear cut," said Chris Williamson, chief economist at Markit, said in a note.

"The Fed is likely to watch the incoming data flow on business activity and demand closely over the coming months before making clear signals on policy changes, and will probably want to see the actual rate of unemployment come down further before being comfortable that a meaningful and sustainable recovery is in place," he added.

U.S. stock futures pointed to a higher open on Wall Street.

Back in Europe, data showed industrial production in Germany jumped 1.8% in April, well above the 0.2% expected by analysts surveyed by FactSet.

Meanwhile, German trade data showed both exports and imports grew strongly, raising hopes of more solid growth in the second quarter.

The Bundesbank, however, cut its 2013 and 2014 growth forecast, saying much will depend whether the euro zone emerges from recession. The central bank lowered its GDP forecast for 2013 to 0.3% expansion from its December estimate of 0.4% and revised its 2014 outlook to 1.5% from 1.9%. Read: Buba cuts German growth outlook -- but too soon?

The DAX 30 index added 0.5% to 8,139.85.

Shares of Deutsche Telekom AG climbed 1.3%, after the company said its T-Systems unit won a contract to provide cloud services to Finnish elevator company Kone Oyj

Insurance firms were also among notable gainers after Citigroup lifted the financial-services sector to overweight from neutral. Shares of Allianz SE added 1.6%, Swiss Re AG put on 2.6% and AXA SA climbed 1.8%.

The U.K.'s FTSE 100 index gained 0.4% to 6,362.30.

Shares of Aberdeen Asset Management PLC slid 4.5%, after Bank of America Merrill Lynch cut the investment firm to underperform from neutral.

BT Group PLC added 3.4%, after Barclays lifted the telecom firm to overweight from equal weight.

France's CAC 40 index traded 0.3% higher at 3,825.88.

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