By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- European equities saw a mixed trading session on Friday, moving sideways as investors focused on earnings season in the U.S. and worries that accelerating Chinese inflation will limit monetary easing by the nation's central bank.

The Stoxx Europe 600 index trimmed an earlier loss to the end the day with a 0.1% decline, posting a 0.3% loss for the week. The index remains up nearly 2.7% since the start of the new year.

"The markets have had a New Year euphoria rally, but whether it can [be sustained] is to be questioned. No one actually wants to take any further positions ahead of the weekend," said Justin Urquhart Stewart, co-founder of Seven Investment Management.

"The one thing that has returned to the market is confidence. The market always wants to go up, but couldn't do it because of uncertainty. Now that we have gotten past the fiscal fudge in the U.S. and we see better news globally there are reasons to move forward," he said.

Among notable movers in the pan-European index, some drug makers were on the rise after UBS upgraded the pharmaceutical sector to overweight from neutral and highlighted it as its preferred defensive play.

Shares of Roche Holdings AG gained 1.4% and Novo Nordisk AS (NVO) moved 1% higher.

International Consolidated Airlines Group SA jumped 5.4%, as UBS lifted the British Airline-parent to buy from neutral.

Pointing in the other direction, shares of Getinge AB tanked 8.2%. The Swedish medical-equipment firm said demand for its products weakened during the final quarter of 2012, making net profit before taxes for the full year fall short of expectations.

Investors also trained their attention on the U.S. earnings season, which kicked off earlier this week with encouraging results from aluminum firm Alcoa Inc. (AA). Friday's results from Wells Fargo & Co. (WFC), the first major U.S. bank to report, beat expectations, although its closely watched interest margins declined more than expected.

U.S. stocks traded mostly lower on Wall Street. .

Japan was also in focus after the government approved a 10.3 trillion yen ($116 billion) stimulus package aimed at boosting GDP growth by 2 percentage points and creating 600,000 jobs.

Data from China, however, countered any lift in sentiment from Japan's efforts. Consumer prices rose to a seven-month high in December, stoking fears that additional stimulus measures are off the table. The consumer-price index climbed 2.5%, with food prices jumped 4.2%.

Mining companies, which are sensitive to growth in China, dropped on the news, with shares of BHP Billiton PLC (BHP) down 2.7%, Rio Tinto PLC (RIO) off 1.2% and Anglo American PLC dropping 1.4%.

Also in London, shares of insurer Aviva PLC rose 3.3%. Citigroup lifted the firm to buy from neutral, saying it is one of the most attractive opportunities in the sector.

On the data front in the U.K., a report on manufacturing production for November showed a 0.3% decline, missing analyst expectations of a 0.5% increase.

The U.K.'s FTSE 100 index , however, advanced 0.3% to close at 6,121.58, with shares of Barclays PLC (BCS) up 1.7%.

Germany's DAX 30 index edged up 0.1% to finish at 7,715.53. Shares of Deutsche Lufthansa AG off 1.8%, after UBS downgraded the airline to neutral from buy.

Shares of Volkswagen AG rose 1.6%. The car maker said its passenger cars brand reached a new sales record in 2012, supported by demand for its new Golf model.

And in France, shares of Electricite de France SA lost 1.6%, after Credit Suisse cut the stock to underperform from neutral, citing weakening earnings and cash flows.

The CAC 40 index managed a 0.1% rise to finish at 3,706.02.

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