European Stocks Snap 4-Day Winning Streak

LONDON—Investors took a breather and most European stock markets edged lower, snapping a four-session run of gains.

The Stoxx 600 shed 0.3% on Friday to close at 255.85, leaving it with a gain for the week of 2.7% and just off a five-month high.

"We're seeing a retraction. We have had a few good days, and it's normal for the market to pull back after that," said Christoph Riniker, head of strategy research at Bank Julius Baer.

Investors were closely following a third day of talks between the Greek government and private creditors. European markets retraced losses late in the day on reports that Greece and its private creditors were nearing an agreement on a deal to write down 50% of the face value of the country's debt by swapping existing bonds for new bonds with longer maturities and lower interest rates. But as investors realized that more talks were slated for Friday evening, stocks pulled back, and indexes generally ended in the red.

The Greek market, which closes earlier than other markets, jumped 2.7% to 708.18.

Optimism out of Athens wasn't, however, enough to pull the broader European market into gains. The U.K. FTSE 100 eased 0.2% to 5728.55, and the German DAX shed 0.2% to 6404.39. The French CAC 40 also slipped 0.2%, to 3321.50.

Most European stock markets reached their highest level in five months on Thursday on the back of successful debt sales. The Stoxx Europe 600 has notched five consecutive weekly gains, for a combined climb of 9.5%.

Oil shares were among Friday's biggest decliners, as crude-oil futures for February delivery dropped below $100 a barrel. BP declined 3.1% and Tullow Oil shed 1.6%.

Petrofac declined 3.9%, hurt in part by a downgrade from J.P. Morgan Cazenove on concerns over the oil-and-gas firm's revenue! prospec ts in 2013.

Mining stocks declined on news that China's purchasing managers' index for January showed signs of contraction in manufacturing activity. Fresnillo dropped 2.4% in London.

Bank shares lent support to European markets following positive earnings reports from a handful of major U.S. banks on Thursday. Commerzbank surged 6.3%, extending Thursday's 15% leap. Banca Monte Dei Paschi di Siena jumped 8.1%, Société Générale rose 4.5% and Danske Bank climbed 4.8%.

Banco Popular Español fell 1.7%, making up much of an early 7% plunge, as 13.8 million new shares started trading after the bank exchanged convertible bonds for new stock.

Vodafone gained 1.5% in London after India's Supreme Court ruled that authorities there can't tax the company on its 2007 purchase of a majority stake in Hutchison Essar.

—Andrea Tryphonides contributed to this article.

Write to Sara Sjolin at sara.sjolin@dowjones.com