European stocks finished higher in choppy trading Friday, after German lawmakers approved a plan to ease the conditions on bailout loans to Greece and amid ongoing discussions over the U.S. budget.
The FTSEurofirst 300 rose, having jumped 1.1 percent on Thursday to its highest close since July 2011 on expectations U.S. politicians would reach a deal to stop the world's biggest economy falling off a " fiscal cliff" of tax rises and spending cuts.
(Read More: What is the "Fiscal Cliff")
"We're going to be playing a little bit of tennis as far as comments are going to be concerned from the U.S. politicians over the coming weeks, unfortunately, over how close we are to getting anything done with the fiscal cliff issue," Alastair McCaig, analyst at IG, said.
Still, some investors are taking a positive stance.
"I would say that both sides have no interest in going over the cliff," Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, said. "I think there will be some kind of agreement over the next week, or week and a half, maybe a little bit longer. Markets will anticipate that, so the underlying tone of the market will clearly be strong."
In the euro zone on Friday, Germany's parliament
Also on Friday, European Central Bank President
In stocks news, most of the main movers across European markets were affected by downgrades by investment banks. Credit Suisse raised its rating on Johnson Matthey o outperform. Stock in the chemicals company rose by 0.54 percent.
Goldman Sachs upgraded luxury retailer LVMH to a buy; shares rose by 2.78 percent.
Andritz was on the receiving end of a downgrade by HSBC to underweight; shares fell by 1.08 percent.