(Reuters) - European shares drifted higher in choppy trade on Friday as signs Greece would seek political consensus on a new aid package and dump a referendum helped cap some fears of an imminent default, although the outcome remains uncertain.
Banks, many of which have a significant exposure to the peripheral euro zone economies and have taken a hit on their balance sheets, were among the top gainers, while miners got some support from firmer metals prices that rose on hopes of an improvement in demand for raw materials.
The STOXX Europe 600 banking index .SX7P rose 1 percent, while the basic resources index .SXPP was up 1.2 percent. Royal Bank of Scotland (RBS.L) rose 4.3 percent on its third-quarter profits and robust capital position.
However, Commerzbank (CBKG.DE) fell 2.5 percent after it took a Greek impairment hit, forcing it to abandon its 2012 operating profit target.
The FTSEurofirst 300 finance/markets/index?symbol=gb%21FTPP">.FTEU3 index of top European shares was up 0.3 percent at 993.06 points at 0956 GMT (5:56 a.m. EDT), after climbing 1.9 percent in the previous session, on hopes the referendum, which could be the beginning of an exit for Greece from the euro zone, could be avoided.
Greek Prime Minister George Papandreou bowed to cabinet rebels and agreed to step down and make way for a negotiated coalition government if his Socialists back him in a confidence vote on Friday, government sources told Reuters.
"Even if Greece doesn't have a referendum, you have got several weeks of political instability there. They could very well have to form a new government, which delays the ratification of the whole process.
"It seems a Greek drama has been avoided for the time being as there are some signals that the proposed referendum on the bailout package will be scrapped," said Koen De Leus, strategist at KBC Securities, in Brussels.
"But the situation is far from clear yet and there is a possibility that the Greek government might fall, which would mean that no bailout money will be available to them for some time. Any such outcome would create more uncertainties."
Investors kept a close eye on a meeting of G20 leaders in Cannes that discussed increasing the International Monetary Fund's resources and building a financial firewall to protect vulnerable euro zone economies Italy and Spain from a possible Greek default.
Fund managers said that investors would stay highly cautious unless there was some clarity on the Greek situation.
"Even if Greece doesn't have a referendum, you have got several weeks of political instability there. They could very well have to form a new government, which delays the ratification of the whole process," said Felicity Smith, fund manager at Bedlam Asset Management that manages $700 million.
"We are trying to see if, in the panic, some otherwise perfectly good and sound companies get unduly knocked back. Some of those industrial stocks, which have a variety of businesses and where the end demand is likely to be robust, could be interesting," she said, giving an example of British engineer Invensys (ISYS.L).
Investors awaited data on U.S. employment growth, which is expected to show that it was too weak in October to pull down the nation's lofty jobless rate, though it may have been strong enough to suggest some economic momentum is building.
The 30-day implied volatility for Britain's FTSE 100 .FTSE, Germany's DAX .GDAXI and France's CAC 40 .FCHI fell for a second straight session on Thursday, according to data from Thomson Reuters Datastream, indicating that investors were gradually increasing their exposure to riskier assets.
The Euro STOXX 50 volatility index .V2TX, Europe's main fear gauge, also fell 4.5 percent on Friday, suggesting an improvement in investors' sentiment.