Europe's STOXX 600 off record highs ahead of US data

European shares retreated from record highs touched earlier on Friday, as caution prevailed ahead of a crucial U.S. data, although gains in Moncler and luxury stocks capped further downside in prices.

The pan-European STOXX 600 index held its ground at 526.32 points. The benchmark index hit an all-time high of 526.72 points earlier in the session, and is set to log its best week in more than a month, if gains hold.

Investors might be questioning is there enough momentum to go higher after touching those record highs, said Daniela Hathorn, senior market analyst at Capital.com.

"We may see a bit of consolidation from here".

Overall gains were muted due to investor caution as markets awaited the U.S. core personal consumption expenditures (PCE) price index - the Fed's preferred measure of inflation - due later in the day.

Shares of Italy's Moncler surged 11.8 per cent after CEO Ruffini struck a deal with LVMH, which will see the retailer partner with Ruffini to make an expanded investment in the luxury group.

The region's personal & household goods sector supported the index with a 1.6 per cent jump.

News of China's stimulus significantly boosted the STOXX 600 benchmark index this week, underscoring the crucial role of Chinese consumers for European companies.

Earlier in the day, China's central bank cut the borrowing cost of its seven-day reverse repurchase agreements, as part of the biggest stimulus package since the pandemic.

China-focused luxury stocks climbed higher, with shares of LVMH, Hermes, Kering, Hugo Boss and Burberry gaining between 2 per cent and 4 per cent.

Gains in automobile stocks provided support, as European luxury carmakers with significant exposure to the Chinese market tend to benefit from higher consumer spending due to the stimulus.

"China had been shoved to second base ... This (rally) puts into perspective how much Chinese consumers matter for Europe," Hathorn said.

Chinese stocks are headed for the best week since 2008.

French consumer prices rose less than anticipated in September, according to CPI figures. The CAC 40 Index was up 0.1 per cent.

Spain's IBEX 35 was trading flat after data signalled the country's inflation eased to 1.7 per cent.

German unemployment rose more than expected in September, according to data. Still, the DAX index was trading up 0.2 per cent at 19,292.20.

Investors are also on the lookout for the euro zone's consumer confidence figures, due at 0900 GMT. European Central Bank's chief economist Philip Lane will be speaking on fiscal policy at 0815 GMT.