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European Shares End Higher on Spain Bailout Talk

European equities rose on Friday, briefly testing last week's 14-month highs, as banking shares were lifted by speculation Spain was moving towards a bailout request.

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Euro zone banks rose 1.7 percent and Spain's Ibex35 added 2.9 percent as Madrid was said to be taking steps to meet conditions for an international rescue, which could pave the way for monetary support from the European Central Bank.

The pan-European FTSEurofirst 300 index closed at 1,119.66 points, up 0.4 percent on the day and broadly flat over the week, which was marked by soft economic data from the euro zone and China curbing optimism over global central bank stimulus.

"The Spanish have done all the right things as far as the Germans and the ECB are concerned, (the bailout) is a formality," David Hussey, head of pan-European equities at Manulife Asset Management, said.

"Consolidation is inevitable but there is this massive global stimulus, money will chase real assets... and I think (the rally) will continue."

The Euro STOXX 50 implied volatility index, which gauges option prices on euro zone blue chips and is regarded as a measure of investor fears of future share price swings, fell 4.4 percent to a 6-month low.

In the U.K., public sector finance data showed the biggest monthly budget deficit ever for the month of August. The figure reached 14.410 billion pounds ($23.473 billion) from the 14.365 billion it was in August 2011.

In stocks news, German shoe maker Adidas slashed its sales target for its Reebok brand on Friday.

Transocean is trying to overturn a ban put in place to stop its operations in Brazil.

Publishing group Pearson also traded higher after an upgrade from BNP Paribas.

And shares of Vendanta Resources and Burberry were firmly in the black after recent losses.