London's blue chip FTSE 100 index rose to a record of 3,911 points, but later drifted back to 3,903 by 1100 GMT for a rise of 12 points.
German shares advanced modestly on the back of gains on Thursday and a 43-point advance by the Dow, but profit-taking took the shine off French stocks following a firm start.
An early boost for the dollar from the Bundesbank's surprisingly big cut in its securities repurchase, or repo, rate on Thursday quickly ran out of steam and it slipped back below 1.49 marks.
German government bonds were firmer in early trade, helping British government bond, or gilt, futures to firm too.
With a long weekend coming up in Britain, dealers said the equity market was likely to remain cautious despite the FTSE breaching a key psychological level at 3,900 points.
The early move forward, sparked by Wall Street's strength and British rate cut hopes following the Bundesbank's move, lacked momentum and shares drifted in light activity.
More From This Section
It's a squeezy market. But the fact that its gone through 3,900 in a reasonably big way is encouraging, one equities trader said.
Dealers expected the market to consolidate its recent gains but the underlying tone remained firm, backed by encouraging corporate earnings and an improved interest rate environment.
They were waiting for Wall Street's opening for confirmation of the New York market's resolve to push higher.
French shares fell three points on profit-taking after opening slightly higher on the back of big gains on Thursday. Bonds also came down.
Retailer Promodes rose 3.07 per cent to 1,276 francs after the Les Echos newspaper reported it could sell its German assets to Spar AG as soon as next Tuesday.
German shares rose slightly in lacklustre bourse trade, with sentiment underpinned by the repo cut and Wall Street overnight.
The 30-share DAX index was up 2.82 points at 2,560.08 at 1100 GMT, but dealers said they expected the market to make more substantial gains next week.
The dollar's fall below 1.49 marks by mid-session in Europe followed fresh assessments of the likely direction of interest rates following the Bundesbank's action.
Although Finland, Greece and Denmark on Friday joined other European nations that cut on Thursday, analysts said the market feeling was that German rates had now bottomed out.
The sentiment is that this will be the last German cut, which has left a bit of a vacuum today as people decide which way to position themselves, a German bank dealer said.