European stocks rose Friday after stronger-than-expected business activity data, narrowly avoiding the worst losing streak in a decade. The Stoxx Europe 600 Index gained 0.6% by the close, its biggest one-day advance since Aug. 4. Sentiment was lifted by data showing private-sector activity in the euro area unexpectedly improved in August, thanks to the strongest manufacturing growth in more than four years.

The gains came as investors digested better-than-forecast purchasing managers' index readings across major economies. Manufacturing activity expanded at its fastest pace since February 2022, while services continued to show resilience despite ongoing economic headwinds.

Analysts noted that the unexpected improvement in euro-area business activity provided a welcome boost to market confidence. The Stoxx Europe 600's advance marked a sharp reversal from recent weeks of declines, suggesting investors may be regaining appetite for risk assets.

The positive data also supported the euro, which strengthened against the dollar. Market participants now turn their attention to upcoming central bank meetings and inflation reports for further direction on monetary policy.